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European High-Yield Bonds 2023 Half-Year Wrap

Key Takeaways   New issuance volume doubled, albeit in a sporadic market with three principal periods of bond issuance and a number of quiet periods. The increase in volume reflects increases in both the number of deals coming to market and average tranche sizes.   Coupon sizes in the first half of 2023 fell from the Q4’22 peak but remained above H1’22 levels, with 79% of deals pricing between 6.1% and 9.9%, compared with 33% in the fourth quarter of 2022. No deals in H1’23 priced above 12% compared with 22% in Q4’22. Average yield to maturity, or YTM, in H1’23 was 7.6%, down from a peak of 10.4% in the third quarter of 2022. Maturities also shortened in the face of higher interest rates.   Refinancings continue to dominate the market, representing the primary use of proceeds in 76% of deals. However, acquisition financings and dividend recaps are also making a comeback.   Aggressive terms continue to appear, despite the variable market conditions. Day 1 capacities to incur additional senior secured debt and structurally senior debt, to transfer value to unrestricted subsidiaries and to make payments to shareholders all increased as a percentage of EBITDA compared with 2022. However,[...]