Credit Institute event: The outlook for high yield

June’s meeting of Credit Institute gave investors the opportunity to discuss the key themes affecting the high yield market, including the Eurozone sovereign crisis and refinancing risk.

Luke Spajic, Pimco: a speaker at June's Credit Institute event

The second meeting of Credit Institute, attended by senior figures from the fixed income investor community, took place on June 30 at an intimate venue in Knightsbridge, London. The event, called High Yield in a Turbulent World, focused on the risks and opportunities in an environment that continues to be dominated by sovereign risk.

Click here to view photos from the event.

After a welcome address from the editor of Credit, Rob Davies, Pimco’s Luke Spajic gave a short talk entitled Credit in a Sovereign World. He emphasised that the Eurozone crisis has shortened investment horizons to the point where even looking past the next day has become difficult. Yet despite the uncertainty, Spajic believed that underlying fundamentals in high yield remain strong, making the sector cheap on a relative basis.

Spajic also moderated the first panel discussion, which featured Alliance Bernstein’s Martin Reeves, Stuart Stanley from Invesco Fixed Income, and Esther Chan of Aberdeen Asset Management.

The discussion, Value and Risks in High Yield – the Macro View, explored the major issues affecting high yield investors; including the potential for a double-dip recession, what impact a period of low growth will have on earnings, whether subordinated paper from financials represents a good opportunity, and the age-old issue of covenants in high yield deals.

This was followed by a second panel discussion, Idiosyncratic Risk in the High Yield Market, which delved into some of the key documentation and legal issues, and whether the European market will be able to absorb the expected wall of bond and LBO refinancings in the coming years.

Louis Gargour of LNG Capital moderated the discussion, which featured Credit Suisse’s Ben Booth, Stephen Mostyn-Williams from DebtXplained, S&P’s Taron Wade and Charles-Henri Lorthioir from Limestone Advisors.

Each meeting of Credit Institute focuses on a specific issue affecting investors. The current series of events is sponsored by CreditSights and RBC Capital Markets. DebtXplained was also a sponsor of the high yield event.