With our global network, we can field teams of lawyers with experience advising issuers and underwriters on high-yield bond offerings in numerous jurisdictions across the Americas, Asia and Europe. Our high-yield lawyers work closely with lawyers in our market-leading banking, structured finance, restructuring and debt capital markets practices and can handle all aspects of high-yield debt offerings, including negotiating complex covenant packages, handling subordination, security and intercreditor issues and advising on bridge-to-bond financings, bank-to-bond financings and restructurings.
Traditional reasons for high-yield offerings include:
- Established companies that do not carry (or have lost) an investment grade rating (i.e. rated Ba 1/ BB+ and below by Moody’s and S&P, respectively)
- Private companies looking to reorganize their capital structure
- Financings for leveraged buy-outs
Issuers of high-yield bonds can benefit from long-term debt financing with covenants that are typically less onerous than the standard covenants included in a traditional credit facility. Investors can benefit from higher interest rates and the potential for capital appreciation.
The ideal candidate for a high-yield bond exhibits some or all of the following characteristics:
- A stable and resilient business model/financial track record and/or growth/recovery story
- Market leading positions and favorable industry trends/growth prospects
- An experienced management team with a proven track record
- Solid cash generation and future deleveraging potential
- Financing needs of at least €150 million to €200 million and with limited bank financing available
- The proceeds prospects of the offering are to be used for refinancing of existing indebtedness, acquisition financing or (defined) general corporate purposes
High-yield bonds are generally structured to be junior to bank debt, i.e., they will either be expressly subordinated (“Subordinated Notes”) or effectively subordinated (but still referred to as “Senior Notes”).
To learn more about high-yield bonds, please access our Asia and Europe High Yield Issuer’s guides available in our highlights section. As with earlier editions, the guides are primarily intended for (first-time) issuers of high-yield bonds. We, therefore, did not assume that users of the guides would already have prior experience with or even a basic understanding of high-yield bonds, and we have explained the relevant high-yield bond concepts in simple non-technical terms, wherever possible. However, we still hope that other market participants (such as underwriters, law firms or other financial and legal advisers) will also find the guides interesting and helpful.