December 2012, European Leveraged Loan Market Analysis
 

December 2012, European Leveraged Loan Market Analysis

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In November, European leverage loan issuance was up, high yield was down, while secondary markets for both loans and bonds went up ...

In November, European leverage loan issuance was up, high yield was down, while secondary markets for both loans and bonds went up

Check out LCD's new, free web sites, LeveragedLoan.com and HighYieldBond.com

http://www.leveragedloan.com
http://www.highyieldbond.com/


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December 2012, European Leveraged Loan Market Analysis December 2012, European Leveraged Loan Market Analysis Presentation Transcript

  • TextEuropean Leveraged Finance Market Update December, 2012 Sucheet Gupte - Director
  • European Market TrendsText • Loan issuance shot up to €4.3 billion from €3.7 billion; HY issuance came down to €3.4 billion from €3.5 billion • Estimated inflows into HY funds were €536 million for November, YTD through the end of November up to almost €6 billion • Secondary markets are up: Loan markets went up 48 bps to finish the month at 96.83 High-yield markets are up 84 bps to finish the month at 100.81 • The S&P European Leveraged Loan Index (ELLI) finished the month up at 0.66% (till the week ending November 29th) • Default rates stabilized during the month.
  • European Loan Flow Name Prices 100 99 Text 97 96 94 93 91 1/11 3/11 5/11 7/11 9/11 11/17 1/12 3/22 5/12 7/12 9/12 11/12. Source: LCD - Leveraged Commentary & Data View slide
  • European HY Bond Flow Name Prices 106 102 Text 98 94 89 85 81 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12. Source: Bloomberg View slide
  • ELLI Multi-Currency Loan Return 2.5% November 2012: + 0.66% October 2012: + 0.47% Text Jan-Nov 2012: + 8.7% Jan-Nov 2011: + 0.71% 1.6% 0.7% (0.2%) (1.1%) (2.0%) 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12. Source: S&P European Leveraged Loan Index
  • Volume: New-issue Loans vs. HY Bonds 10 HY bonds Text Loans 8€billions €3.4B 5 3 €4.3B 0 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 . Source: LCD - Leveraged Commentary & Data
  • Historical Maturity Schedule by Par Outstanding 50.0 Text 37.5 25.0 12.5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YE 2009 YE 2010 YE 2011 Oct 2012. Source: LCD - Leveraged Commentary & Data
  • Reasons for Reductions in Outstanding Loans Text Reductions from Outstanding Loans (€B) Share of Share of 2011 Jan-Sep 12 Outstandings Outstandings HY Takeouts 5.9 4% 2.9 3% Other Full Paydowns 26.9 20% 7.7 7% Other Partial Prepayments 6.0 5% 1.7 2% A-to-E 6.4 5% 10.9 10% Defaults/Restructurings 1.1 1% 5.2 5% 46.3 35% 28.5 25% Source: S&P European Leveraged Loan Index (ELLI). Source: S&P European Leveraged Loan Index (ELLI)
  • ELLI Default Rates – European Leveraged Loans Default Rate by Principal Amount Default Rate by Issuer Count 16% 16% 13% 13% 10% 10% 6% Text 6% 3% 3% 0% 0% 2/09 3/10 4/11 11/12 2/09 2/10 2/11 11/12. Source: LCD - Leveraged Commentary & Data
  • Themes to watch forText• No significant changes to the quantative easing policies from the ECB• Flurry of activity before year-end; otherwise deals getting pushed into the new year• Bond-for-loan takeouts will continue to keep pace• Peripheral issuers continue to access the high yield markets• Issuers will seek ‘add-on’ facilities instead of whole new facilities for their needs• European issuers increasingly go across the ‘pond’ to the US, to issue loans and bonds• Sell-side bankers and sponsors optimistic about M&A activity during 1Q of 2013• Loss of CLOs: almost 85% of CLOs will be past reinvestment periods by end of 2013
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