Debt markets are slowly reopening for Europe’s commercial real estate companies, but investor confidence is yet to recover to pre-2022 levels given the prevalence of high leverage, heavy capital expenditure and questions over governance at some issuers.

Corporate defaults across Europe are likely to continue rising in the months ahead before stabilising around year-end as financing conditions ease on stronger economic growth, more subdued inflation and companies’ self-help measures.

Scope expects growth in the AuM of direct lenders focusing on European companies to slow amid constraints on growth and investment. But while the credit profile of borrowers has deteriorated in the last two years, the picture is improving.

EU policymakers remain steadfast in their conviction that deploying bank and institutional capital and retail savings through frictionless banking and capital markets union will create economic security. An EU MidCap Bond market should be a priority.

Addressing climate change and reducing pollution, amid growing concerns about the impact of vehicle emissions on public health, remains a long, costly and painful journey for the automotive industry, original equipment makers (OEMs) and suppliers alike.

European ESG corporate bond issuance surged to EUR 93bn-equivalent in H1 2024, keeping pace with the torrent of overall market activity and stabilising at around 25% of total bond volumes. We expect full-year ESG issuance to grow 40% year over year.

Credit risk remains high in Europe’s retailing sector this year, particularly in the discretionary goods segment, with no sign that the rising trend of business failures from last year will reverse in 2024 after defaults rose in the first quarter.

A sustained period of higher interest rates will present a challenge for many borrowers worldwide, as economies adapt to a new era of comparatively tight monetary policy amid a recovery in growth and enduring inflation.

The methodology is now final following a call-for-comments period and will apply to all issuer and debt ratings of corporates in the sector. The application of the updated methodology will not trigger any rating changes.

Bondholders in the Hungarian National Bank’s Bond Funding for Growth programme (‘NKP’) face a covenant-related credit challenge amid difficult domestic economic conditions, says Scope Ratings.