European high-yield issuers are proceeding with deals this month despite poor investor sentiment, continued credit downgrades and abysmal equity markets. "It's ironic that the busiest two weeks of the year for high-yield coincides with the worst weeks for overall market sentiment," says one high-yield trader in London. With three or four more deals in the pipeline, investors have been lightening up on holdings considered too rich, which, coupled with general financial market woes, has put the secondary high-yield market off by two or three points, he adds.
High-yield pros say issuers are proceeding because they need the funds and cannot afford to wait until September when the markets traditionally reopen after the summer break. "It's impossible to do a deal in August and the market may not come back better anyway," says another trader. One high-yield salesman was quite enthusiastic that the market will remain strong and the deal pipeline will continue to grow: "Companies are beginning to recognize that it's worth it to pay for flexible long-term financing instead of depending on banks."
Another high-yield trader was less optimistic. He points to the E150 million deal from Elf Antargaz launched by Deutsche Bank, which is barely hanging on at par, and the E250 million Carmeuse Lime deal done by BNP Paribas, which immediately traded down two points after being launched on June 12. By month-end deals are expected from Greif Brothers, a U.S. packaging company, Gerresheimer Glas and Kaufman & Broad, a French home manufacturer, which will be led by Merrill Lynch. The underwriters for the Gerresheimer Gas and Greif Brothers transactions could not be determined at press time.