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ELFA Quarterly Newsletter

Issue #1

Welcome to our first quarterly newsletter.

This year’s credit markets have been a wild ride for our members such that volatility is beginning to feel like the new normal. These are testing times indeed for both investors and borrowers.

For ELFA, however, it is business as usual. The ongoing volatility is a reminder of the importance of carrying on with the work we are doing to ensure that the leveraged finance market across Europe is transparent, efficient and resilient. The fundamental issues have not changed.

While its form and its practices are still evolving ESG is not going anywhere. ESG disclosure is a top priority for the buy-side, driven by end-investors and their stakeholders. The leveraged finance market as a whole continues to lag behind public equity markets in the quality of ESG reporting. Our members need comprehensive ESG data to make sound investment decisions  and they want ongoing updates. For companies issuing debt, showing their commitment to ESG means ensuring that the ESG data they are collecting makes it into company reporting and deal documents – our recently published second edition of our Guide for Company Advisers to ESG Disclosure in Leveraged Finance Transactions can prove a useful tool in this regard.

Following the success of ELFA’s sector specific ESG Fact Sheets to support disclosure and engagement on the most important areas of environmental, social and governance for corporate borrowers, our CLO Investor Committee are developing an additional tool in conjunction with CLO managers to enable comprehensive ESG reporting that will streamline and standardise due diligence. Watch this space.

Volatility is bringing some new issues to the surface. The pressure exerted on borrowers by the perfect storm of rising interest rates and inflation is of great concern to investors, even as defaults remain low. Credit distress undoubtedly will rise and a dearth of maintenance covenants will make it more difficult for lenders to intervene early.   Furthermore, given the steady erosion of investor protections in bond and loan markets, sponsor-friendly manoeuvres will threaten recoveries and render creditor outcomes less certain. Transparency and disclosure will be essential to pricing risks.

We are encouraging best practice on covenants by educating issuers via Covenant Tearsheets on every new high yield bond and leveraged loan deal to build awareness of better investor protection early in the process.

Let’s not forget that the breadth and depth of our membership has made the ELFA a  powerful forum for leveraged credit investors that engages with individuals and organisations throughout the industry through seven committees. Please do get in touch with me ( or post any comments you wish to share on our social media pages.

Finally, we are holding our Inaugural ELFA annual conference on the 8th and 9th November at Bloomberg Headquarters for members on afternoon of Tuesday 8th and the full day conference on Wednesday 9th November. Please see the agenda and registration here.

In conclusion, this prolonged period of volatility is challenging for market participants across the leveraged finance ecosystem, giving ELFA an opportunity to highlight the groundwork we have already laid to support the resilience of the market, and to execute on what there is still to do.

Sabrina Fox, CEO ELFA