Fountain Square Asset Management GmbH hat dies direkt geteilt
𝐖𝐡𝐚𝐭 𝐠𝐨𝐞𝐬 𝐚𝐫𝐨𝐮𝐧𝐝, 𝐜𝐨𝐦𝐞𝐬 𝐚𝐫𝐨𝐮𝐧𝐝! This development is super exciting and offers a really interesting environment for credit investors! The long period of low interest rates in recent years has been driving investors crazy. In the hunt for at least decent returns, safety got pushed aside more and more. Risk-on! You can really see this "intense" development in the covenants of new issues. In theory, covenants are supposed to protect investors. The goal is to prevent companies from borrowing too much (financial covenants) or doing risky deals like buying or selling without approval (restrictive covenants). But to get even a small positive return, investors were willing to give up these protections. Now, in some of the bigger distressed debt cases in Europe, we're seeing the result of this dilemma. Too much debt was allowed and noticed too late, assets can be moved out of restricted groups, or new super-senior facilities mess up the ranking. 𝐒𝐢𝐥𝐯𝐞𝐫 𝐋𝐢𝐧𝐢𝐧𝐠𝐬 But hey, there’s always a silver lining, as the graphic shows impressively. Plus, in H1/2024, over 55% of all non-investment-grade issues had to be secured. That’s a record high. When companies look for new money, it’s mainly for refinancing. Only 28% were issued as "credit negative." This was very different in recent years (M&A, dividends to sponsors, etc.). The covenant headroom is also much higher again. This mix creates an exciting environment for active and, in our case, event-driven credit investors. Going the extra mile in analysing these and other points creates an interesting opportunity-set for our Colibri fund (and the Toucan very soon). Keep On Rockin‘ ✌🏻 Fountain Square Asset Management GmbH #FountainSquare #FSAM #Colibri #ToucanSoon #AssetManagement in #Alternative #Finance and #Capitalmarkets #Investments with #EventDriven #Alpha in #FixedIncome #Bonds #Securities