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Junk Bond Investors Split From Broader Industry Group in Europe

Laura Benitez and Katie Linsell
(Bloomberg) -- High-yield investors in Europe are splitting from banks and law firms representing borrowers just months after setting up a lobby group alongside the broader trade body.The European Leveraged Finance Association is ending its formal affiliation with the Association for Financial Markets in Europe on July 1, according to a statement seen by Bloomberg News. The decision was mutual, Gary Simmons, managing director of AFME’s high-yield division, said in the statement.A majority of ELFA members voted to leave AFME last week because they want more independence to resist aggressive terms and weakening protections in Europe’s 145 billion-euro ($165 billion) leveraged-finance market, according to people familiar with the matter. AFME had tried to mend ties with dozens of investors that quit its high-yield division last year after the introduction of a 7,500 pound ($9,570) annual membership fee added to frustration with borrowers using a frothy junk-bond market to chip away at protections.Going Independent“It was essential for us to establish our organization within AFME as we were building from scratch,” said Sabrina Fox, executive adviser at ELFA. “By going independent, we’re now able to pursue goals that are unique to us, and we feel it will help us work more effectively on implementing some of our own strategies to further our agenda.”Fox and a representative for AFME declined to comment on the investor vote.“The high-yield investor community is an important part of the European high-yield industry and we value its contribution to maintaining a healthy and viable market,” AFME’s Simmons said.ELFA’s members have almost doubled in size since March, with Oak Hill Advisors and Invesco Ltd. among recent additions, according to a person familiar with the matter, who isn’t authorized to talk about it. The 20 asset managers in the group also include Janus Henderson Investors, AXA Investment Managers and JPMorgan Asset Management.The group recently pushed back against issuers’ reluctance to provide the full picture of their finances and increased pressure on private companies to make their earnings public.“We want to be fully independent because we’re representing a different constituency of the market,” said Tatjana Greil Castro, a portfolio manager at Muzinich & Co Ltd. and an ELFA member. “AFME is more of a sell-side organization and they’re representing their constituency. We’re still fully expecting to collaborate in the future.”To contact the reporters on this story: Laura Benitez in London at lbenitez1@bloomberg.net;Katie Linsell in London at klinsell@bloomberg.netTo contact the editors responsible for this story: Sarah Husband at shusband@bloomberg.net, ;Vivianne Rodrigues at vrodrigues3@bloomberg.net, Abigail MosesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- High-yield investors in Europe are splitting from banks and law firms representing borrowers just months after setting up a lobby group alongside the broader trade body.

The European Leveraged Finance Association is ending its formal affiliation with the Association for Financial Markets in Europe on July 1, according to a statement seen by Bloomberg News. The decision was mutual, Gary Simmons, managing director of AFME’s high-yield division, said in the statement.

A majority of ELFA members voted to leave AFME last week because they want more independence to resist aggressive terms and weakening protections in Europe’s 145 billion-euro ($165 billion) leveraged-finance market, according to people familiar with the matter. AFME had tried to mend ties with dozens of investors that quit its high-yield division last year after the introduction of a 7,500 pound ($9,570) annual membership fee added to frustration with borrowers using a frothy junk-bond market to chip away at protections.

Going Independent

“It was essential for us to establish our organization within AFME as we were building from scratch,” said Sabrina Fox, executive adviser at ELFA. “By going independent, we’re now able to pursue goals that are unique to us, and we feel it will help us work more effectively on implementing some of our own strategies to further our agenda.”

Fox and a representative for AFME declined to comment on the investor vote.

“The high-yield investor community is an important part of the European high-yield industry and we value its contribution to maintaining a healthy and viable market,” AFME’s Simmons said.

ELFA’s members have almost doubled in size since March, with Oak Hill Advisors and Invesco Ltd. among recent additions, according to a person familiar with the matter, who isn’t authorized to talk about it. The 20 asset managers in the group also include Janus Henderson Investors, AXA Investment Managers and JPMorgan Asset Management.

The group recently pushed back against issuers’ reluctance to provide the full picture of their finances and increased pressure on private companies to make their earnings public.

“We want to be fully independent because we’re representing a different constituency of the market,” said Tatjana Greil Castro, a portfolio manager at Muzinich & Co Ltd. and an ELFA member. “AFME is more of a sell-side organization and they’re representing their constituency. We’re still fully expecting to collaborate in the future.”

To contact the reporters on this story: Laura Benitez in London at lbenitez1@bloomberg.net;Katie Linsell in London at klinsell@bloomberg.net

To contact the editors responsible for this story: Sarah Husband at shusband@bloomberg.net, ;Vivianne Rodrigues at vrodrigues3@bloomberg.net, Abigail Moses

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.