DBRS Launches Series on the Canadian Leveraged Finance Market
DBRS has today published the first in a series of articles on the Canadian leveraged finance market. Over the next few months, the Primer on Canadian Leveraged Finance Ratings series will discuss developments in the Canadian high-yield debt market, challenges faced by investors and issuers participating in the market, DBRS’s rating approach and methodology in assessing risks in these investments and selected analytical issues related to credit risks and recovery prospects of high-yield debt issues.
“We believe that through these discussions,” says Gregory Pau, Senior Vice President, “investors will be more equipped to understand the risks and returns of high-yield debt investments and make well-informed investment decisions.”
In the first issue, “As the Canadian High-Yield Debt Market Develops, Risk Awareness and Discipline Are Key,” DBRS takes a look at the recent growth of the Canadian high-yield debt market and highlights possible sources of volatility in the coming years. By examining what happened in the U.S. high-yield market following the onset of the recent financial crisis in the summer of 2007, DBRS offers insight into how investors in the Canadian market could avoid following the same path.
“Participants in the Canadian market – both investors and issuers – could face material loss if risk-return imbalances similar to what was seen in the U.S. market were to develop,” adds Mr. Pau. “Not allowing such imbalances to persist and grow would be an important step to ensure the healthy development and growth of the Canadian high-yield market and its smooth functioning as an accessible source of funds for issuers and of decent returns for investors.”
A copy of this commentary is available by contacting us at info@dbrs.com.