The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Too quick to PIK? The deals set to haunt European high yield

Participants in the European high-yield market say the collapse of Phones 4U, which left PIK-note holders wiped out, was a one-off event. But it serves as a stark reminder of the liquidity trap that lies in wait for yield-hungry investors chasing each other further and further down the credit curve. And it calls into question whether European investors have developed the necessary credit skills to invest in such risky assets.

PIK

He must have had better Monday mornings. Many investors in European high yield had a nasty shock on September 1 when Phones 4U, the UK mobile phone retailer and high-yield bond issuer collapsed.

But the investment manager responsible for City Financial’s Credit Opportunities Fund must have needed an extra shot of coffee, or something stronger. His fund held 4.7% of the entire portfolio in the Phones 4U Payment-in-kind (PIK) note that had been issued the previous September.


Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree