Companies with higher gearing levels turning away from banks

For many, high yield is nothing more than a niche investment. However, last year's impressive returns and increased issuance is bringing the attractions of this asset class to a much wider audience.

We have already seen £8.5bn of new paper issued across Europe this year with a further $50bn expected over the rest of 2010. In a market of just $200bn, that is an aggressive new issue calendar. An increasing number of well-established and fundamentally strong companies are moving into the high-yield space. The financial crisis has constrained the banking sector’s ability to lend. With tighter banking regulation in the pipeline suggesting more stringent capital requirements to come, banks’ reluctance to lend may continue for some time. Companies, especially those with higher levels of...