Clariane - comment

A clear sign of the strength of the High Yield market: Clariane is refinancing its £200m perpetual bonds by tapping its recently issued 6.875% senior unsecured notes.

We purchased the perpetual bonds at 102%, fully aware of the embedded repayment (call) risk. However, with a 13% coupon, we were well compensated for assuming this risk. Net of the capital loss, the position has generated a gain of c.5 points over the 7-month holding period.

The company announced a €230m fungible tap of its 6.875% senior unsecured notes due April 2031, with proceeds used to repay the £200m perpetual bonds in full. The perpetuals will be called on 15 June, but we may crystallise our gains and exit our position before that time.