November 17, 2017 / 5:16 PM / 2 years ago

European secondary loan prices succumb to volatility

LONDON (Reuters) - Average prices tumbled in Europe’s secondary loan market this week, reflecting volatility in the high-yield bond market as investors retreated from the asset class after highly indebted ‘junk’ rated companies reported poor earnings.

Europe’s top 40 leveraged loans fell to an average of 100.24, down 30bp from 100.54 the previous week, according to Thomson Reuters LPC data.

The broader floating rate note market was also quoted 25bp-50bp lower this week, a London-based loan trader said.

“Volatility has returned to the loan market. The street seems to have lightened up on risk,” the loan trader said.

Netherlands listed telecom company Altice (ATCA.AS) saw the telecom sector leading European leveraged loan prices lower as the US high yield market saw its biggest weekly outflow in more than three years of US$4.4bn in the week to November 15, according to Lipper.

Altice’s €300m term loan B fall more than 100bp to an average bid of 98.98 in the week to Thursday, the loan trader said, adding that the telecom sector was down around 50bp on average.

Loan pricing is typically less responsive to volatility than bond pricing, given lower trading volumes. A second trader noting that a 50bp move in the secondary loan market was a notable swing.

Altice’s recent €500m 10-year bond issue was trading at 93.57 on Friday according to Tradeweb, having priced only last month at 4.75%, as the firm’s shares slumped by more than 10% on Friday.

The company announced the loss of about 75,000 broadband customers in France, its biggest market, in its third quarter results in early November, with some lured by heavy promotions on offer at rivals.

Concern has subsequently grown around the group and its ability to manage its €50bn debt pile, after chief executive Michel Combes resigned last week.

Editing by Tessa Walsh

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