European credit investor predicts decline of unrated bond deals

Stephen Zinser, chief investment officer of London-based European Credit Management, has predicted that unrated European borrowers will find it increasingly hard to access the capital markets. “Manchester United has not done any favours to unrated issuers,” he told a media briefing this morning, referring to the poorly performing recent bond deal by the English football club.

The firm’s head of high yield research, Peter Aspbury, pointed out that the process of seeking a rating gives potential investors comfort that an issuer understands the needs of the credit market and the rating process. “It doesn’t matter whether they are junk or not, if an issuer manages to a specific rating, they will be able to maintain access to funding. It is good to go through the ratings process.”

Europe has historically seen a far greater number of unrated corporate bonds than the US. And borrowers have long confounded predictions that Europe would move closer towards a US-style ratings culture.

European Credit Management was formed in 1999 by Zinser and fellow former Merrill Lynch banker Steven Blakey in 1999. Part-owned by Wells Fargo, it manages €12 billion of mainly investment grade corporate bonds, as well as ABS, leveraged loans, high yield bonds and emerging market debt.