Carval, CQS Moving In on Battered Telecom Credits After Mayhem
2020-03-24 15:14:34.172 GMT

By Antonio Vanuzzo and Marianna Aragao
(Bloomberg) — Some hedge funds are buying debt issued by
telecommunications firms caught up in the credit market rout yet
likely to make money through the coronavirus crisis.
Carval Investors and CQS Asset Management are among
managers increasing exposure to the sector, according to people
familiar with the matter who asked not to be named because
they’re not authorized to speak publicly.
Representatives for Carval and CQS declined to comment.
Read more: High-Yield Valuations Shattered As Virus Impact
Wreaks Havoc
The prospect of deep recession caused by the coronavirus
pandemic has left nearly a third of Europe’s high-yield
corporate bonds trading more than 10% below face value, a level
classed as “stressed,” according to data compiled by Bloomberg.
Almost two thirds are more than 40% short, which classifies them
as “distressed.”
But telecom companies are potentially headed for a reprieve
as the pandemic rages through major world economies, with
nationwide lockdowns and enforced home working boosting demand
for their services.
Some of the sector’s bonds have already started to recover
from the lows touched last week.
Altice France SA’s bonds maturing in January 2028 are
currently quoted at around 84 cents on the euro having fallen
below 79% of face value by March 18, according to data compiled
by Bloomberg. However, BT Group Plc’s hybrid notes remain close
to their low point and are trading below 80 cents on the euro.
“Panic selling has generated some good entry points,” said
Do Ake, analyst at Spread Reseach in Lyon, France. “Companies
such as Altice and Vodafone Ziggo offering cable services have
recently pushed back their maturities and are in a better
position than Telecom Italia, which has to refinance 4 billion
of euro-denominated bonds by 2022.”
Telecom Italia SpA’s 2 billion euros of 2022 bonds are
quoted at around 93 cents on the euro, according to data
compiled by Bloomberg.