Moody’s: Euro HY Pari Passu But Not Par with Loans
November 10, 2010
European junk bonds may rank pari passu with loans, but that does not mean they are on par with bank debt, according to Moody’s Investors Service.
While Moody’s may give bonds and loans an equal rating, enforcement is often controlled by banks, particularly on debt issued for LBO deals. “Moreover, banks are also better positioned than bondholders prior to default though the leverage provided by their maintenance financial covenants, enabling them to step in earlier and secure some recovery advantage,” said Chetan Modi, a Moody’s team leader who authored a recent study on European bonds.
European corporate issuers sold $46 billion in junk bonds in the first nine months of 2010. European issuers priced $43 billion in high yield bonds for all of 2009.
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