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Fitch: Europe Corporate Pre-Funding Strong as Downgrades Dwindle
September 18, 2014 / 2:37 PM / 3 years ago

Fitch: Europe Corporate Pre-Funding Strong as Downgrades Dwindle

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: EMEA Non-Financials Bond Market Monitor here LONDON, September 18 (Fitch) Fitch Ratings says non-financial corporate issuers continued to pre-fund at a healthy rate in 8M14 by issuing bonds 1.5x the 2014 maturing bond volume, despite a small fall in absolute volume. High yield (HY) bonds grew their share of new issuance to 37% year on year as issuer-friendly conditions broadly prevailed and spread tightened towards all-time lows. However, the recent demise of Phones 4U - the wireless telecoms services company - may temporarily dent investor sentiment for riskier credits. The upgrade-to-downgrade ratio moved into positive territory, with the volume of bonds experiencing upgrades exceeding downgrades by 1.8x compared with 0.3x for 2013. The move was driven by a collapse in downgrade volume with no meaningful above-trend change to upgrades and the outlook remains cautious as net Outlooks and Rating Watches remain in negative territory, despite improving in the past two quarters. GIIPS-based non-financial issuers accounted for only 3.1% of downgrades compared with 17.7% in 2013, with bonds from Italian firms showing the greatest improvement - registering no downgrades in the year to July from a share of 16% in 2013. The improvement in rating profiles coincided with a 14% increase in issuance from GIIPS firms, although a 93% drop in supply from Russian issuers has helped reduce the regional diversity of new bond volume. Telecoms, media and technology (TMT) firms boosted issuance by 16%, while volume from energy, utilities and infrastructure (EUI) and industrials sectors shrank - most notably for the latter, which declined 14%. The boost to new bonds supply in TMT came as the sector experienced the best rating migration turnaround in 7M14 compared to 2013. The rise of HY issuance is driven by an increasing share of 'B' rated bonds as riskier credits access the bond market to take advantage of favourable funding conditions. HY bonds account for 22% of total outstanding non-financial corporate bonds at the end of June 2014, compared to 8% at the end of 2008.. More information is available in the report, 'EMEA Non-Financials Bond Market Monitor', which is available at or by clicking the link above. Contact: Michael Larsson Director +44 20 3530 1260 Fitch Ratings Limited 30 North Colonnade London E14 5GN Monica Insoll Managing Director +44 20 3530 1060 Roelof Steenekamp Director Corporates +44 20 3530 1374 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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