Sub-investment grade European corporates are experiencing a severe increase in financial stress and a dramatic fall in profitability, while their A-rated counterparts are seeing only a marginally increased financial burden. This is according to research by Demica, the securitisation consultancy and technology services company. Financial pressure for last year was measured by using a model based on interest cover – the relationship between profits and interest payments on debt commitments – and was compared year on year. The study revealed that financial stress has increased for all rated companies in Europe. However, the increase has been marginal for A-rated companies (3%), substantial for B-rated companies (36%), and punishing for sub-investment grade companies (49%). Demica says an increase in leveraged buy-outs is to blame for the heightened financial pressure. Declan Lynch, executive vice president at Demica, commented: ‘Sub-investment grade corporations across Europe are being hit hard by the high cost of servicing current debt commitments.’
The annual BNP Paribas Cash Management University kicked off on Thursday morning with treasury professionals congregating in Paris from across Europe.
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Sibos 2017 day two highlights: Brexit and banking, and why ‘data is the new oil’ in financial services
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