European leveraged loan market analysis - April 2013


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The high yield bond market took control in March, while the market readied for actual CLO issuance.
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European leveraged loan market analysis - April 2013

  1. 1. out TextEuropean Leveraged Finance Market Update April, 2013 Sucheet Gupte - Director open pause Text
  2. 2. European Market TrendsText • Loan issuance was €4.85B in March 2013; HY issuance was €8.6B. • Estimated inflows into European HY funds was €614M for March compared to an outflow of €154M in February and an inflow of €1.8B in January. • Secondary markets are mixed: loan markets up almost 40 bps points to finish the month at 99.86; high yield markets down 26 bps to finish the month at 102.57. • The S&P European Leveraged Loan Index (ELLI) finished March up 0.91%. • Default rates were mixed: default rates by principal amount fell; default rate by issuer count stayed level.
  3. 3. 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 3/12 5/12 7/12 9/12 11/12 1/13 3/13. Source: LCD - Leveraged Commentary & Data
  4. 4. 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 1/13 3/13. Source: Bloomberg
  5. 5. ELLI Multi-Currency Loan Return 2.5% March 2013: + 0.91% Text February 2013: + 0.40% Q1 2013: + 2.52% Q1 2012: + 4.36% 1.9% 1.3% 0.6% 0% 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13. Source: S&P European Leveraged Loan Index
  6. 6. Volume: New-issue Loans vs. HY Bonds 15 HY bonds Text Loans 11€billions 8 4 0 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 . Source: LCD - Leveraged Commentary & Data
  7. 7. 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 2/10 2/11 12/11 3/13 2/09 2/10 12/11 2/12 3/13. Source: LCD - Leveraged Commentary & Data
  8. 8. Themes to watch forText • Further spread / yield compression is expected, as loan issuers use access to the high yield markets to reduce existing spreads. • Along with repricings, some sponsors are tabling dividend recap deals to take advantage of investor demand, both in loans and high yield. • Still strong demand for HY bonds, so far this year, net inflows stand at €2.26B. • Bond for loan-take-outs will continue to keep pace as issuers address their maturity concerns. • Both Apollo and Pramerica are expected to price their CLOs sometime in April and there are whispers that others might look at doing the same. • Still fear that geo political shocks could erode confidence from the markets.
  9. 9. TextEuropean Leveraged Finance Market Update April, 2013 Sucheet Gupte - Director
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