Junk-bond selloff pushes weakest European yields above 21%
Rising yields and distressed-debt losses are pressuring credit funds as lenders retreat from the most vulnerable borrowers.
Key takeaways
- Yields on CCC-rated debt rose above 21% in Europe and 18% in the United States.
- Arini Capital Management’s main fund has lost 26% this year.
- Virgin Media debt worth £22 billion has fallen sharply in price this year.
A selloff in the riskiest junk bonds has pushed yields on CCC-rated debt above 21% in Europe and 18% in the United States. Investors are retreating from vulnerable borrowers as concerns grow over their ability to manage higher rates and disruption.
Those yields were around 16% in Europe and 15% in the United States at the start of the year, according to Expansión. The European market has also faced concerns about France’s public finances.
Aggressive moves by some financially strained companies’ owners to shift assets beyond creditors’ reach have added to the pressure. Arini Capital Management’s main fund has lost 26% this year, while several credit-trading teams at large multi-strategy hedge funds have reportedly been forced to close.
Arini has large positions in debt linked to Aston Martin and Altice International, whose debt prices have fallen after deals that shifted assets away from creditors. Its holdings in US telecoms company Brightspeed have also weakened.
Debt comprising £22 billion in Virgin Media bonds and loans has plunged in price this year, turning the company into one of the market’s more troubled borrowers, according to Expansión. Credit portfolio manager Simon Matthews of Neuberger Berman said forced sales by specialist funds had worsened price declines.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
