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Precarious high-yield refinancings show the strain

Sovereign stress might limit refinancings; Covenant threat from revolvers

Joe Swanson, co-head of European restructuring at Houlihan Lokey in London

"With final maturities approaching fast, we are likely to see banks push equity holders to come up with sensible de-risking strategies for cases where refinancing is not an option"

Joe Swanson, Houlihan Lokey


The eagerness with which high-yield investors have embraced some of the more challenging credits in Europe could soon come back to haunt them. There are signs that some high-yield refinancings have simply placed too great a debt-service burden on their recipients and cracks have begun to appear. In mid-April Italian yellow pages company Seat Pagine Gialle revealed that it had engaged a team of restructuring advisers to tackle its €2.7 billion debt pile. The firm had issued a €200 million high-yield bond deal in October 2010 with a 10.5% coupon but had subsequently been downgraded from single-B minus to triple-C plus. And in May it emerged that French life sciences group Novasep had met with bondholders to discuss restructuring options for the firm, which tapped the high-yield bond market for the first time in December 2009 with a €375 million dual-currency deal through JPMorgan and BNP Paribas.

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