The market has been talking about fallen angels for a good
18 months now and it might be time for it to come up with a
different analogy. It's not just that it's a horrible cliché - more
to the point is that it is rather inaccurate in view of the extent
of the problem. The euphemistic alternative - cross-over debt - is
even less descriptive. If we have to stick with angels, Euromoney
would prefer
angels-falling-violently-en-masse-and-still-plummeting.
This isn't very catchy but accurately describes what happened in
the European high-yield market in the third quarter this year. The
trend peaked in August, with Alcatel, Ericsson and Vivendi going
high-yield. Now just five fallen angels make up over 40% of the
double-B and single-B European market (see table) and four have
been demoted in the past four months.
This is problematic for high-yield investors. The European
high-yield market was already a lot more concentrated...
