London's high yield traders are suffering after Virgin Media left them exposed
Working in high yield trading can be a very lucrative business. It can also be a very painful one.
Following this month's descent of Virgin Media O2's bonds into distressed territory, multiple sources say that some banks' European high yield trading desks are nursing large losses.
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The banks concerned either didn't respond or declined to comment.
Virgin Media O2's bonds plummeted in early October after the UK's Competition and Markets Authority (CMA) said provisionally that a plan involving Virgin Media joint venture Nexfibre Networks to acquire Netomnia Ltd, could lead to reduced competition in the UK broadband market.
If the Nexfibre-Netomnia deal goes through, Virgin Media will get £1bn of cash to help pay down its roughly £22bn of debt. The CMA is due to make its final ruling on the deal December 15th. In the meantime, Virgin Media's debt is in distressed territory and high yield desks and hedge funds holding the debt are thought to be nursing large losses. If the CMA decides the deal can go ahead, these losses could yet be recovered.
Desks understood to have lost money recently on the so-called "VMED trade" include JPMorgan's high yield desk in Europe; JPMorgan declined to comment. Separately, a senior high yield trader has also left another London bank in recent weeks, according to people familiar with the matter. The reason for his departure is unclear.
High yield desks have made large profits for successful traders in the past. However, JPMorgan’s European high yield business has also seen multiple senior exits in recent years. They include Bhavit Sawjani, whose team at ExodusPoint reportedly lost more than $70m after he left the bank, and Gianfranco Canepa, whose former team at JPMorgan built up a €500m position in French grocer Casino Guichard-Perrachon and also bet on Metalcorp, a subsidiary of Monaco Resources Group. Those positions reportedly swung to a loss of nearly $70m after Canepa left.
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