Appetite for Risky Credit Shows Recovery Trade Far From Over
By Irene García Pérez
(Bloomberg) — The recovery trade is far from over, if the
boom in European high-yield issuance is anything to go by.
The tight pricing of beauty company Coty Inc.’s euro-
denominated notes, rated several steps below investment grade,
is the latest sign of the appetite for riskier credit. It
follows the success of Piraeus Financial Holdings SA’s sale of
Additional Tier 1 notes — the riskiest bank debt — on
Wednesday.
With quantitative-easing measures squeezing returns for
safer bets this year, investors are awaiting the European
Central Bank meeting and a report on U.S. inflation later today
for clues on the trajectory of policy.
“The market has again demonstrated that names most hit by
the Covid-19 pandemic, such as cosmetics producer Coty, are in a
position to issue on attractive financing terms, provided that
they can reassure investors that recovery is on track,” Spread
Research analysts wrote in a note to clients on Thursday.
Coty, which has multiple tie-ups with the Kardashian
family, sold 700 million euro ($852 million) notes due in 2025
to repay part of a term loan. They were priced at an interest
rate of 3.875%, well below the 5.78% average yield for a CCC
rating, according to data compiled by Bloomberg.
The New York-based company cut pricing from an initially-
marketed 4-4.25% range and upsized the offering by 200 million
euros following strong investor demand. While the bond is rated
B3/B at Moody’s and S&P respectively, the issuer rating is
Caa1/B-.
Another example of money managers piling up on higher
yielding options is evident in the case of Piraeus, which priced
a 600 million-euro AT1 in a first for a Greek lender. Investors
bid for more than three times the notes on offer.
High-yield corporates have raised more than 70 billion
euros from Europe’s debt market this year, a milestone not
reached until October last year, data compiled by Bloomberg
show.

….