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. 

Firstly, we must establish the corporate existence of our new limited purpose minibank CASH CDO I—or CCDO I. CCDO I will be the vehicle by which we will attempt to intermediate the US high-yield market with the German institutional investor base. Exhibit 15.2 illustrates the mechanics described in this hypothetical example. 

An important constituent that we have not mentioned lately is the German institutional investor. For those that remember, the catalyst behind the overall transaction. Now that we have built the basic product or tool (CCDO I) to help intermediate the high-yield market to the investor, we should explore any tailoring the CDO can provide to the end investor. The vehicle thus far has been customised principally around the collateral and asset manager. 

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. 

---