The Memo by Howard Marks
The Insight: Conversations – European Credit at a Turning Point
Sep 8, 2023
Armen Panossian, Madelaine Jones, and Nael Khatoun discuss the current state of European credit, challenges created by the end of the easy money era, risks from geopolitics and AI, and the quality advantage in European markets. They also explore the shift from bank dominance to private credit, macro themes in European and US markets, jurisdictional differences in European investing, labor shortage concerns, and navigating uncertainty in the market.
42:25
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Quick takeaways
- European credit market has seen a year of recovery, with a focus on refinancing and light new prime issuance.
- Private credit faces challenges like Brexit but presents opportunities for upside protection and investment in long-term recovery potential.
Deep dives
Ways to raise debt financing in European markets
In Europe, corporate borrowers have various ways to raise debt financing. Banks are active but have become more conservative since the global financial crisis. The syndicated loan market is dominated by collateralized loan obligations (CLOs) managed by investment managers. Larger borrowers and private equity-owned businesses often tap into this market. High yield bonds and investment grade bonds are also used, although retail investor bases are not as significant in Europe as in the US. Private credit is a growing sector, but regulatory limitations in Europe limit the retail investor base.
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