"If we can't come up with a structure, the future of high yield
in Europe is under threat." The concern of Clifford Chance
securities lawyer John Connolly is justified. There were just 14
high-yield deals in Europe in the first four months of this year,
compared with 134 in the US, according to investment banking
research firm Dealogic. European high yield isn't working, and only
the region's lawyers can rescue it.
An investor in junk bonds in the US can expect to get about a
third of the money invested back from a borrower that defaults. But
differences in the way deals are structured in Europe mean
investors are likely to lose as much as nine-tenths of their
initial outlay. With default levels for 2002 double those of the
previous 17 years put together, a group of institutional buyers,
including the asset management arms of Aberdeen, AXA and ING, have
even written to the industry saying that...
