Small companies tapping high yield in droves, says Moody's
LONDON, Oct 16 (IFR) - Smaller companies are tapping the European high yield market in greater numbers than ever before, says Moody's, highlighting recent issuance from European companies with Ebitda as low as GBP20m.
Nearly a fifth of 2013's debut high yield issuers have had Ebitda of less than USD100m-equivalent, according to the ratings agency, over three-times more than in previous years.
"It is encouraging to see the success of these relatively small companies in issuing bonds at the bottom of the ratings spectrum," says Chetan Modi, a managing director in Moody's European leveraged finance team.
"However, it remains to be seen whether this is a temporary consequence of investors' search for yield, that will diminish as interest rates rise."
While its longevity is still in question, the trend's significance this year has been undeniable, as even companies with Ebitda less than USD50m-equivalent have been able to get deals across the line.
Six such companies have tapped the market this year, according to Moody's, with September alone seeing three from the UK - Study Group, Avanti Communications and Soho House.
Study Group's Ebitda for the year ending June 30 2013 was only GBP39m. Avanti's in this period was even lower at GBP21m, while Soho House's 2012 Ebitda was less than GBP20m.
The GBP115m issue from Soho House was also the lowest issuance size for a new European LBO.
Study Group, the company with the largest Ebitda, was the only one of these deals with a fully European execution, however.
Study Group's sterling deal was run off London syndicate desks with only European roadshows. Avanti by contrast tapped the dollar market, and while Soho House's deal was in sterling, it was managed by US boutique investment bank Imperial Capital with a US roadshow taking place before European meetings. (Reporting by Robert Smith, editing by Julian Baker)
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