Highly profitable minimum – Newspaper Kommersant No. 220 (7421) dated 11/28/2022
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The volume of placements in the segment of high-yield bonds (HDO) in the second half of 2022 stabilized around the level of 1 billion rubles. per month. This is significantly lower than last year, and the number of default events has increased. However, experts believe that despite the difficulties in the Russian economy, in 2023 the volume of placements will recover, and a significant increase in defaults should not be expected due to business adaptation to new realities.
The volume of new placements of VDO stabilized at the level of 0.75-1 billion rubles. per month, follows from the review of the Ivolga Capital investment company, which Kommersant has read. Analysts believe that the minimum for this segment has been reached. Moreover, in their opinion, “even the start of partial mobilization could not significantly reduce the volume of placements.”
The volume of primary placements of the VDO market after February 24 amounted to 4.5 billion rubles, although there were almost no placements in March-April. At the end of the year, the volume may reach 12 billion rubles, Ivolga Capital believes.
In 2021, according to Cbonds, the volume of placements of such bonds amounted to about 44 billion rubles. According to Ivolga Capital analysts, next year the volume of placements may increase by 20-30%.
The concept of high-yield bonds is not enshrined in Russian legislation. Debt market participants refer to them as bonds with a low credit rating (not higher than BBB / BBB- on the Russian scale) or without it at all, with a yield premium to the key rate or government securities yields of several percentage points, a small volume of issues (usually up to 1 billion rubles) and issued mainly by SMEs.
The stabilization of the VDO segment can be associated with the adaptation of Russian business to the economic situation in the country in the second half of 2022 and with the low key rate of the Central Bank (7.5% per annum), believes Vladimir Chernov, analyst at Freedom Finance Global. One of the main factors supporting the segment under external pressure is the lack of alternatives for high-yield investments, he believes.
The key stabilization factor is the preservation of access for most companies to sources of liquidity on terms that are comfortable for them, says Alexander Shurakov, a leading debt market analyst at Otkritie Investments.
At the same time, among bond issuers there are companies that have left key suppliers and there have been significant changes in business, he notes. But the presence of open credit lines, as well as the expansion of the bank debt repayment schedule, allows such issuers to “buy the time” necessary to adapt to new operating conditions, Mr. Shurakov adds.
However, next year does not promise to be easy for the debt market. According to Nikolai Ryaskov, head of the bond department of Ingosstrakh-Investments Management Company, the expected fall in the ruble exchange rate, coupled with rising inflation, may lead to the need to raise the key rate of the Central Bank, which will negatively affect the VDO segment – the cost of borrowings will increase, and the demand for them will increase. on the part of investors will drop sharply, which will make it impossible to refinance part of the debt. Now the number of investors has decreased significantly. According to the Bonds Lab resource, few issuers managed to collect more than 300 applications for their issues this year, while in 2021 there were more than half of such placements, and in some cases the number of transactions exceeded 1 thousand.
At the end of nine months of 2022, the number of default events reached 194, including non-execution of offers, non-payment of coupons and non-redemption. This is higher than the figure for all of 2021, when 178 such events were recorded.
Difficulties with refinancing may lead to an increase in defaults in the VDO segment next year, Mr. Ryaskov believes.
At the same time, according to Alexander Shurakov, if companies from problematic market sectors maintain access to external liquidity, a noticeable increase in the number of defaults can be avoided next year, by postponing the solution of debt problems to a more distant future. Freedom Finance Global even expects a decrease in the number of defaults in 2023, as businesses must adapt to new economic realities.
According to Ivolga Capital, since the beginning of the SVO, rating agencies have carried out about 60 rating actions with respect to VDO issuers, with the share of affirmed ratings being 64%, and the share of upgrades being 13%. At the same time, analysts add, most of the downgrades took place in the spring, while in the summer and autumn there were only confirmations and rating upgrades.
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