RPT-Fallen angels loom over European bond market

lunes 8 de febrero de 2016 04:13 GYT

(Repeats story published Friday to reach additional subscribers)

* Investment-grade firms threatened with downgrades

* Commodities and energy exposure weigh

* Investors faced with opportunities and pitfalls

By Robert Smith

LONDON, Feb 5 (IFR) - Analysts expect billions of euros of investment-grade corporate bonds to come crashing down to junk, and while the market is better prepared than ever to smooth the transition, there is still scope for some nasty shocks.

Fears over a fresh wave of fallen angels - companies that lose their investment-grade status - have already gripped the US market, with CreditSights recently warning that as much as US$74bn of energy bonds could drop to high-yield.

But while the European capital markets have poured less money into the oil and gas sector, there are still plenty of businesses under pressure from sinking commodities prices or badly timed bets on emerging markets.

There are 28.5bn of BBB and BBB- rated European corporate bonds under negative watch from ratings agencies, according to Bank of America Merrill Lynch credit strategists. They expect 25bn to slip into high-yield indices in the medium term.   Continuación...