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(Bloomberg) -- Fresh from a grueling restructuring, French IT firm Atos SE’s bonds are among the surprise winners in Europe’s junk debt market this year, part of a trend investors are dubbing “the dash for trash.”
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Three of its notes issued as part of its overhaul have been some of the best performers in European high-yield this year, including two which sit in the lowest bracket of junk ratings. Other low-rated junk bonds issued by troubled companies, including Altice France SA and car parts supplier Standard Profil Automotive GmbH, have also done well.
The trend seeks to profit from bets on recently-restructured companies with high coupons, given spreads on high-yield bonds are near the tightest in years and there’s little in the way of fresh debt.
“It’s no surprise in this environment that investors are willing to turn the pages again on spicier names — and even those which restructured in recent history,” said Simon Matthews, a senior portfolio manager at Neuberger Berman. “The opportunity set with credit spreads back at tights has become sparse.”
While its US counterpart has been hit by fears over the implications of trade tensions on growth, Europe’s market has been relatively insulated. That’s leaving managers on the continent still on the hunt for yield.
Other big gainers in Europe’s junk market this year include the bonds of Patrick Drahi’s Altice France, which finally agreed a deal with lenders in February after months of haggling. Germany’s Standard Profil, which is currently undergoing debt negotiations with lenders, has also seen its notes gain nearly 15 cents on the euro so far this year.
A spokesperson for Atos declined to comment. Representatives for Altice France and Standard Profil didn’t immediately respond to requests for comment.
The moves are happening as investors look for ways to put a tidal wave of cash to work. The risk premium on Bloomberg’s pan-European high yield index shrunk to 301 basis points last week, the lowest in more than three years. While spreads have widened since then on the back of geopolitical tensions, they remain around 100 basis points tighter than the historical five-year average.
At the same time, new issuance in the primary market has been slow, with dealmaking being held back by market volatility and geopolitical tensions.