European high-yield market

The third phase of the European high-yield market s evolution appears to be following the US market s model, with an increased focus on higher qnality issuers, more investor-friendly debt structures, and expansion of the asset classes accessed by institutional investors. 

EXHIBIT 28.1 Summary Default Statistics for US and European High-Yield Markets 2001 and First Nine Months of 2002... 

Default and Recovery Rates in the Emerging European High-Yield Market... 

Given this new landscape, in 2001, Fitch Ratings created a par based default index specific to the European high-yield market. The objective of this chapter is to compare and contrast default and recovery patterns across the two markets in order to give global bond investors and European investors, in particular, historical and current benchmarks for measuring credit risk. 

THE EUROPEAN HIGH-YIELD MARKETS EARLY DEVaOPMBHT... 

European High-Yield Market Par Value Outstanding at 30/9/02 Percent... 

The moral of the story is that in an efficient market a high default rate does not necessarily translate into equally dismal returns. The reality that many of the defaulted issues were trading at deep discounts at least six months before default confirms that the European high-yield market had achieved a meaningful level of sophistication by 2002. 

In 2001, Fitch Ratings launched a default index dedicated to the emerging European high-yield bond market. The index is a par based index and was created using the same methodology Fitch employs for its US high-yield default series (see Exhibit 28.2). In particular, in order to... 

In addition to the default rate rising to exceptionally high levels, other characteristics of the first batch of European high-yield defaults reveal the aggressive nature of the market s early years. Fitch observed that the aver-... 

Fitch used the market prices of defaulted bonds one month after default as a proxy for recovery value. The growth of a secondary market for European high-yield bonds made this analysis possible but ultimately the various bankruptcy jurisdictions in Europe will determine how bondholders will fare. The outcome of these filings will be very meaningful for the development of the market going forward because each country has its own bankruptcy laws and not all are favorable to bondholders. Some jurisdictions, such as France for example, strongly... 

The key performance indicators for analysing credit card portfolios include portfolio yield, monthly payment rate (MPR), delinquencies, charge-offs, and excess spread. For most European credit card ABS, these performance indicators are published on a monthly basis on Bloomberg. The high degree of standardisation in terms of which performance indicators are published and how they are calculated makes the credit card ABS market very transparent. This also allows us to construct meaningful indices which help us track the performance of the whole (or a significant part) of the credit card market. 

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