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Insights into European High Yield 2025 Year in Review – High Volume, High Flexibility as Refinancings Fuel Covenant Creep and New Money Deals Push Boundaries:

• Refinancing Dominance Drives Incremental Covenant Loosening: Repeat issuers systematically expanded flexibility through backdated build-up baskets, enhanced debt capacity, and looser ratio tests in refinancing transactions.
• Sponsor-Backed Deals Push Aggressive Documentation Boundaries: Moreover, new money transactions like Boots, Urbaser, and Kelvion featured oversized day-one capacity and permissive provisions including Available Amount double builders and uncapped structurally senior debt.
• Build-Up Basket Usage Without Ratio Tests Creates Value Leakage Risk: Following the Altice playbook, multiple issuers added permission to use build-up baskets for investments without leverage conditionality, enabling significant asset transfers outside the restricted group.
• Investor Pushback Achieves Selective Documentation Improvements: Nevertheless, meaningful buyside resistance forced pre-pricing changes in several deals, removing highest watermark provisions, tariff adjustments, and excessive Pick Your Poison baskets.
• Post-Restructuring Bonds Showcase Comprehensive LMT Blockers: Ardagh’s second lien notes implemented extensive anti-liability management provisions including J. Crew blockers, omnibus anti-LMT covenants, and enhanced supermajority consent requirements.