Italian high-yield activities thrive amid strong debt market – Fitch

Italian high-yield and leveraged finance issuers are benefiting from favourable debt capital market conditions, according to Fitch Ratings’ 2024 update on the sector. The report highlights the limited number of small deals, less-cyclical issuers, and a preference for bonds as key factors supporting this trend.

Strong demand for speculative-grade debt has driven significant capital inflows into high-yield funds and collateralised loan obligations (CLOs) since 2023, leading to a wave of refinancings and a few new issuances over the past 12 to 18 months.

‘BB’ rated national champions have successfully refinanced staggered maturities, while ‘B’ category leveraged buyout (LBO) companies have secured better terms to fund expansion.

Investors are increasingly open to dividend recapitalisations and subordinated debt issuances, as evidenced by Telecom Italia’s recent complex liability management exercise involving the sale of its fixed-line network.

Fitch notes minimal rating migration among its portfolio of Italian high-yield and leveraged corporate credits, with only a limited number of issuers flagged for default risk. While these trends indicate resilience in the Italian market, the absence of syndicated term loan structures may still leave smaller, more leveraged deals vulnerable.

Attribution: Fitch

Subediting: M. S. Salama