The Liquidity Stress Index (LSI) for EMEA fell to an all-time low of 8.9% in February 2015, substantially down from its peak of 18.8% in December 2012, according to Moody’s Investors Service’s SGL Monitor for the EMEA region. “Although we do not expect widespread liquidity problems for high-yield companies in 2015, the decline of the LSI could slow in 2015. Despite persistent low interest rates and liquidity benefits from the ECB’s QE programme, high-yield markets remain somewhat more discriminating for the weakest companies and the flow of newly rated issuers has slowed over the past six months”, says Tobias Wagner, analyst in the corporate finance team at Moody’s. “At the same time, some companies that have refinanced in 2013-14 will not meet their own growth expectations, which could result in weakening liquidity profiles for the worst performers”, adds Mr Wagner.

Moody’s liquidity concerns for speculative-grade non-financial corporates are subdued globally. Pockets of weaker liquidity, such as in Eastern Europe including Russia or in the US energy industry, are sidestepped by solid broader speculative-grade corporate liquidity.

Moody’s notes that many LBOs have weak covenant packages that help their liquidity profiles because it is less likely that covenants constrain the company’s ability to draw under revolving credit facilities. However, this trend is credit negative because weaker covenants also reduce the ability of creditors to step in early in cases of deteriorating operating performance.

Each quarter, “SGL Monitor: EMEA Edition” provides unique Moody’s data and commentary on non-financial corporate liquidity trends in the EMEA region. “SGL Monitor: EMEA Edition” is now available on

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