Blog Post
Octus on Credit: Robust Primary, Hazardous Secondary Markets with Aggressive LMEs on the Rise
Robert Schach, Deputy Managing Editor, Europe
For many investors, 2025 can’t end soon enough. Markets struggled against a sluggish economic backdrop, U.S. tariffs upended decades of trade policy, and aggressive liability management exercises heightened uncertainty on both sides of the Atlantic. Selecta‘s restructuring marked another milestone in the adoption of U.S.-style creditor-on-creditor violence in Europe. And just before year-end, controlling shareholder Patrick Drahi escalated his strongarm tactics, suing Altice U.S. bondholders for engaging in a coup and dropping down assets generating 80% of Altice International’s earnings.
Despite secondary market headwinds, primary markets remained resilient on strong demand for paper. The European CLO market grew to 70 managers with €40 billion in net supply, while cumulative HY fund inflows reached €9 billion by November. But economic weakness fueled rating downgrades, producing the highest downgrade-to-upgrade ratio in five years. That swelled triple-C-rated debt—particularly painful for CLOs bumping against triple-C buckets.
European HY defaults held steady at 3.3%, but distress is building in the loan market: 6% of loans now trade below 80, up from 3% in January, setting up an eventful start to 2026…
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