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(Bloomberg) — Europe’s junk bond market has reopened with its first offering since early April, following weeks of tariff-induced volatility.
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Italian gaming firm Lottomatica Group SpA started marketing a €600 million ($684 million) senior secured note on Wednesday, amid a cross-asset rally triggered by US President Donald Trump softening his tone toward China and Federal Reserve Chair Jerome Powell.
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More borrowers could follow suit. The iTraxx crossover, an index tracking the cost of insuring European junk-rated companies against default and a key indicator of credit stress, saw its largest intraday drop since April 14 on Wednesday.
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“I expect that high-yield issuance will come back as volatility settles,” said Mark Remington, a portfolio manager at EFG Asset Management. “Many issuers need to come to the market to refinance. And with uncertainty over the macro backdrop, many borrowers will likely want to get deals done now rather than later.”
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Junk bond markets worldwide experienced a savage selloff in the wake of Trump’s tariff announcement on April 2, as credit fear gauges soared to their highest since the banking meltdown in March 2023. The spread on a Bloomberg index of pan-European high yield bonds jumped by over 100 basis points, hitting its highest level in nearly 18 months.
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This week’s switch in sentiment is good news for borrowers with upcoming maturities, as well as those banks that have either committed to financing deals or are looking to underwrite new ones.
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Underwritten buyout debt packages in the pipeline include €2.5 billion of high-yield bonds backing Flutter Entertainment Plc’s acquisition of Playtech Plc’s Italian gambling business and the $4.25 billion in bonds and loans backing Sycamore’s buyout of Boots, part of the bigger Walgreens Boots Alliance Inc. take-private.
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Lenders to the leveraged finance market have already lost out on some new supply due to tariff-induced turmoil. KKR signed up direct lenders for its acquisition of Karo Healthcare, steering the deal away from the banks it had picked to underwrite the initial loans.
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The market shock saw company debt sales grind to a halt in the US, while borrowers pulled deals in Europe’s leveraged finance market.
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Lottomatica is the first junk rated borrower to come to the European market since Danish wind turbine installer FairWind A/S issued €75 million of bonds on April 4. The US, meanwhile, has seen a couple of deals since the tariff announcement, from energy firms Venture Global Plaquemines Lng and Excelerate Energy LP. A $4 billion junk-debt offering to help finance QXO Inc.’s buyout of Beacon Roofing Supply Inc. is also in the works.
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Lottomatica looks set to pay more for its new bond, with initial price talk of 5.25%. Its current outstanding June 2030 bonds were quoted at 4.66% on Wednesday, according to pricing compiled by Bloomberg.
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