According to senior bankers, JPMorgan Chase & Co. is collaborating with around 10 stressed or distressed creditors in Europe, aiming to reduce the cost of government bailout loans in the debt sector.
Daniel Rudnicki Schlumberger, the bank’s co-head of EMEA leveraged finance, said in a meeting that the majority of businesses are seeking to offload loans made the previous year to help them go through the pandemic and lock in lesser rates.
Typically, interest expenses for state-backed rescue packages increase over time, making them largely costly Meanwhile, stimulus initiatives from central banks and investor demand have brought borrowing costs close to all-time lows. The offers are also part of the plan of JPMorgan to improve lending to companies that need near-term funding as part of the pandemic fuel interest in rescue financing.
“We’re focusing more on stressed and dislocated credits this year that are seeking balance sheet shake-outs due to the impact of the pandemic,” Rudnicki Schlumberger said.
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JPMorgan has many stats to talk about. The possible increase in repayment-linked issuance for strained and stressed borrowers compares with 10 deals rated CCC+ or below for the whole of last year and eight in 2019, data compiled by Bloomberg indicate. There has been a surge of sales from the low end of the junk spectrum in the last weeks, with more than 2 billion euros ($2.43 billion) of triple C-rated debt released this year so far.
This month, the German airline Deutsche Lufthansa AG received a coupon of 2.875 percent on a EUR 750 million loan to partially repay a EUR 9 billion package of state funding. According to data summarized by Bloomberg that compares with trading levels of about 6 percent in March.
Appetite for stressed and special cases is also rising from private credit funds seeking higher returns. The private credit market for performing credits swelled to around $850 billion from $315 billion in 2010. They deliver average yields of 6-9 percent.
JPMorgan, which headed the 2020 league tables for global high-yield bond sales, began beefing up its interest in distressed businesses last year when the ailing outlook for retail stores and national lockdowns forced dozens of high-profile names into bankruptcy or restructuring.
It’s searching out more challenged companies after leading some of last year’s most influential success stories and turnaround financings. The bank has worked as an international coordinator for cruise operator Carnival Corp, luxury carmaker Aston Martin Lagonda Global Holdings Plc, and Casino Guichard-Perrachon SA which is the French supermarket chain.
“We’re seeing more credit buyers seeking higher-yielding assets, and they’re willing to stretch on credits to achieve these goals. There are deep and growing pockets of credit capital”. said Ben Thompson, co-head of EMEA leveraged finance at JPMorgan.