Location
Please select your investor type by clicking on a box:
We are unable to market if your country is not listed.
You may only access the public pages of our website.
Special situations: An unusually broad opportunity set
Adam Phillips discusses our special situations approach and explains why the mid-market offers a highly compelling opportunity set.
The special situations option
Companies encounter credit stress for many reasons, such as economic cycles, sectoral stress, underperforming business lines, upcoming debt maturities, or just too much debt. But, in current market conditions, rolling over the debt is no longer straightforward, and in a rising rate environment, debt can become more challenging to service. For certain businesses no longer able to refinance their way out of difficulty, distressed investors can be the only source of capital, providing options for companies facing financial stress.
Our approach
We invest in bonds and loans in developed markets, selecting single-name corporate issuers where an identified event will likely provide a clear path to exit. Our investment process is predicated on maximising risk-adjusted returns and benefits from the skills of the wider BlueBay leveraged finance team, ensuring breadth and depth of issuer coverage.
Identifying opportunities
We focus on identifying suitable opportunities using bottom-up research and fundamental credit analysis. Our specialists have both the resources and knowledge to participate in and, in many cases, lead the restructuring process, which means we can provide our expertise from start to finish to drive a restructuring. And for us, the relationships and networks we have fostered over time are crucial to sourcing differentiated investment deals. BlueBay’s broader research channels, market-leading intellectual capacity and trading capabilities further enhance our team’s proprietary sourcing networks.
“We focus on identifying suitable opportunities using bottom-up research and fundamental credit analysis.”
An unusually broad opportunity set
We believe there is always something to do, there are always pockets of opportunity, and distressed situations can emerge in any market environment, whether during an economic expansion or a contraction. That said, corporates are currently facing a number of challenges, and the opportunity set is unusually broad across multiple sectors and countries. Our watchlist of potential opportunities is now five times the size it was two years ago, consisting of over 300 names across multiple sectors and countries. Managing the list with discipline and process is essential to focus analysts in the right areas. Furthermore, we believe that the timeframe for the opportunity is likely to extend over several years.
The European mid-market
Growth in the opportunity set has been particularly evident in the mid-market sector – a space we broadly define as companies with EUR30-500 million in revenue. Mid-market companies, specifically, are less resilient to these shocks compared to their large-cap peers. We believe that Europe is the global epicentre of stress and distress and that mid-market companies in Europe are less diversified, less resilient and have less access to the capital markets. In short, we favour the European mid-market because there are more opportunities, and at the same time, we see less competition, as larger funds tend to focus on much larger capital structures.
A compelling future
For investors with the flexibility to pursue a special situations credit approach, the European mid-market presents an exciting opportunity set with the potential to deliver compelling risk-adjusted returns. We anticipate that this opportunity will be prolonged and that there is a strong case for investors to add an allocation to the strategy.
Sign up for insights by email
Subscribe now to receive the latest investment and economic insights from our experts, sent straight to your inbox.
This document is a marketing communication and it may be produced and issued by the following entities: in the European Economic Area (EEA), by BlueBay Funds Management Company S.A. (BBFM S.A.), which is regulated by the Commission de Surveillance du Secteur Financier (CSSF). In Germany, Italy, Spain and Netherlands the BBFM S.A is operating under a branch passport pursuant to the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). In the United Kingdom (UK) by RBC Global Asset Management (UK) Limited (RBC GAM UK), which is authorised and regulated by the UK Financial Conduct Authority (FCA), registered with the US Securities and Exchange Commission (SEC) and a member of the National Futures Association (NFA) as authorised by the US Commodity Futures Trading Commission (CFTC). In Switzerland, by BlueBay Asset Management AG where the Representative and Paying Agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The place of performance is at the registered office of the Representative. The courts at the registered office of the Swiss representative or at the registered office or place of residence of the investor shall have jurisdiction pertaining to claims in connection with the offering and/or advertising of shares in Switzerland. The Prospectus, the Key Investor Information Documents (KIIDs), the Packaged Retail and Insurance-based Investment Products - Key Information Documents (PRIIPs KID), where applicable, the Articles of Incorporation and any other document required, such as the Annual and Semi-Annual Reports, may be obtained free of charge from the Representative in Switzerland. In Japan, by BlueBay Asset Management International Limited which is registered with the Kanto Local Finance Bureau of Ministry of Finance, Japan. In Asia, by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures Commission (SFC) in Hong Kong. In Australia, RBC GAM UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of financial services as it is regulated by the FCA under the laws of the UK which differ from Australian laws. In Canada, by RBC Global Asset Management Inc. (including PH&N Institutional) which is regulated by each provincial and territorial securities commission with which it is registered. RBC GAM UK is not registered under securities laws and is relying on the international dealer exemption under applicable provincial securities legislation, which permits RBC GAM UK to carry out certain specified dealer activities for those Canadian residents that qualify as "a Canadian permitted client”, as such term is defined under applicable securities legislation. In the United States, by RBC Global Asset Management (U.S.) Inc. ("RBC GAM-US"), an SEC registered investment adviser. The entities noted above are collectively referred to as “RBC BlueBay” within this document. The registrations and memberships noted should not be interpreted as an endorsement or approval of RBC BlueBay by the respective licensing or registering authorities. Not all products, services or investments described herein are available in all jurisdictions and some are available on a limited basis only, due to local regulatory and legal requirements.
This document is intended only for “Professional Clients” and “Eligible Counterparties” (as defined by the Markets in Financial Instruments Directive (“MiFID”) or the FCA); or in Switzerland for “Qualified Investors”, as defined in Article 10 of the Swiss Collective Investment Schemes Act and its implementing ordinance, or in the US by “Accredited Investors” (as defined in the Securities Act of 1933) or “Qualified Purchasers” (as defined in the Investment Company Act of 1940) as applicable and should not be relied upon by any other category of customer.
Unless otherwise stated, all data has been sourced by RBC BlueBay. To the best of RBC BlueBay’s knowledge and belief this document is true and accurate at the date hereof. RBC BlueBay makes no express or implied warranties or representations with respect to the information contained in this document and hereby expressly disclaim all warranties of accuracy, completeness or fitness for a particular purpose. Opinions and estimates constitute our judgment and are subject to change without notice. RBC BlueBay does not provide investment or other advice and nothing in this document constitutes any advice, nor should be interpreted as such. This document does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product in any jurisdiction and is for information purposes only.
No part of this document may be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose in any manner without the prior written permission of RBC BlueBay. Copyright 2023 © RBC BlueBay. RBC Global Asset Management (RBC GAM) is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management Inc., RBC Global Asset Management (UK) Limited and RBC Global Asset Management (Asia) Limited, which are separate, but affiliated corporate entities. ® / Registered trademark(s) of Royal Bank of Canada and BlueBay Asset Management (Services) Ltd. Used under licence. BlueBay Funds Management Company S.A., registered office 4, Boulevard Royal L-2449 Luxembourg, company registered in Luxembourg number B88445. RBC Global Asset Management (UK) Limited, registered office 100 Bishopsgate, London EC2N 4AA, registered in England and Wales number 03647343. All rights reserved.
Sign up for insights by email
Subscribe now to receive the latest investment and economic insights from our experts, sent straight to your inbox.