# European junk debt sales spring back to life as sentiment improves
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-20
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Europe Junk-Rated Bond Sales Rise in January After Market
Meta Description: Discover how junk-rated companies in Europe are seizing the opportunity to issue bonds as markets bounce back, with a positive outlook on high-yield debt.
URL: https://financedigest.com/european-junk-debt-sales-spring-back-to-life-as-sentiment-improveshtml

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By Chiara Elisei

LONDON (Reuters) – Junk-rated companies in Europe have raised $1.4 billion from bond sales this month as investors return to riskier debt after rising interest rates and Russia’s war in Ukraine froze markets last year.

According to Refinitiv data, those sales so far in January add to almost $2.2 billion worth of sales in December and $760 million in November.

Although sales of sub-investment grade bonds, considered among the riskiest assets globally, remain well below [levels over the same period](https://www.financedigest.com/electronic-board-level-underfill-and-encapsulation-material-market-to-expand-at-a-cagr-of-5-5-by-during-the-forecast-period-of-2020-2030.html "Electronic Board Level Underfill And Encapsulation Material Market to expand at a CAGR of 5.5% by during the forecast period of 2020-2030") last year, analysts said the pick-up in issuance was positive.

The high yield market is opening up after last year, when there was a particularly long period of time where it was broadly closed,” said Tatjana Greil Castro, co-head of public markets at Muzinich, a fund [manager which focuses on credit](https://www.financedigest.com/managing-trade-credit-and-insurance-in-the-context-of-international-commerce-expansion.html "Managing trade credit and insurance in the context of international commerce expansion ").

Some $7 billion of high [yield bonds](https://www.financedigest.com/stocks-fall-bond-yields-rise-as-focus-shifts-to-fed-rate-outlook.html "Stocks fall, bond yields rise as focus shifts to Fed, rate outlook") were sold in Europe this time last year, according to Refinitiv. That was just before markets were [shut off in February when Russia](https://www.financedigest.com/exclusive-kazakh-mcdonalds-shut-outlets-temporarily-after-halting-supplies-from-russia-sources.html "Exclusive-Kazakh McDonald’s shut outlets temporarily after halting supplies from Russia – sources") invaded Ukraine.

Decades-high inflation and aggressive central [bank rate hikes also weighed on debt](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") markets with investors shunning risk assets.

More companies are now venturing [back into the market](https://www.financedigest.com/analysis-bond-traders-get-their-swagger-back-in-rate-obsessed-markets.html "Analysis-Bond traders get their swagger back in rate-obsessed markets"), a sign they are willing to test appetite and lock in new funding before interest rates rise further.

Firms are either selling new debt or asking investors to extend the maturity of existing debt, offering in return an [increase in the interest](https://www.financedigest.com/rci-bank-increases-easy-access-interest-rate-to-1-02.html "Rci Bank Increases Easy Access Interest Rate To 1.02%") they pay.

On Thursday, telecommunications firm [Telecom Italia](https://www.financedigest.com/telecom-italia-in-talks-with-unions-on-up-to-2000-job-cuts-in-italy.html "Telecom Italia in talks with unions on up to 2,000 job cuts in Italy") started selling at least $500 million in bonds to refinance short-term debt, while Altice France kicked off a process to extend a total of just over $6 billion and roughly 2 billion euros ($2.2 billion) worth of loans to August 2028.

Last week, Air France SA-KLM sold a debut sustainability-linked bond worth one billion euros, giving the [European credit market its first major high-yield deal in months](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks").

The cost of insuring sub-investment grade debt exposure this [week fell to its lowest since](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") April, a further sign that sentiment towards risk assets is improving.

While most [corporates have addressed junk debt](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays") maturing this year, there are a few companies that are under pressure to refinance as soon as possible. Analysts say that such firms could struggle with [selling new debt and might require shareholder](https://www.financedigest.com/intercos-fund-shareholders-l-catterton-otpp-sell-6-stake-at-7-discount.html "Intercos fund shareholders L Catterton, OTPP sell 6% stake at 7% discount") support to entice investors.

Italian medical device firm LimaCorporate, for instance, on Tuesday started selling a 295-million-euro bond to refinance its current 275 [million euros](https://www.financedigest.com/amazon-grants-1-5-million-euros-to-dutch-seaweed-farm-project.html "Amazon grants 1.5 million euros to Dutch seaweed farm project") bond maturing in August, according to a memo seen by Reuters. Its [private equity](https://www.financedigest.com/4-trends-that-will-have-a-major-impact-on-private-equity-in-2021.html "4 Trends that will have a major impact on private equity in 2021") owner EQT is putting new capital in the business to strengthen it and get investors more comfortable with the deal.

($1 = 0.9240 euros)

(Reporting by Chiara Elisei; editing by Dhara Ranasinghe and Emeia Sithole-Matarise)


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