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Bargain hunters spread to Europe

First it was a trickle, now it's a stream. The deal-flow in high yield debt issues is swelling in Europe as buyers and issuers prepare for even lower interest rates and the homogenous euro currency bloc. They're all looking for opportunities in the narrow line between debt and equity: the high-yield market. But please don't call it junk. Rebecca Bream reports


If you believe the hype, 1998 is the breakthrough year for high-yield corporate debt in Europe. Already by the end of February more deals had been done than in the whole of 1997, a reward for the banks that have been dabbling in this market since the early 1990s. Changes in bank lending, investor flight from Asia and the onset of Emu are driving the market forward, say its promoters.

"The key to the development of any market is momentum," says Robin Doumar, co-head of European leveraged finance at Goldman Sachs. "We are reaching critical mass in the high-yield market right now, it's a very exciting time."

High-yield bond issues this year have included a Dm300 million ($164 million) issue in February from Fresenius Medical Care, the world's largest producer of dialysis products, and a £180 million ($269 million) issue from IPC magazines in March. These were swiftly followed by NTL Cable's issue of £300 million, and the first ever euro-denominated high-yield deal, raising almost €147 million ($160 million) for Cellular Communications International (CCIL).

Most recent deals are thought by bankers and investors to have performed well; the market has yet to encounter a truly bad deal, or worse, a default.

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