European Leveraged Finance Market Update - March 2011


Published on

It was advantage issuers in the European leveraged finance market in February and early March. Reverse-flexes and repricings emerged, while cash continued to pour into investor coffers.

In this analysis: syndicated loan and high yield bond prices, loan returns, volume, default rates, plus trends to watch for in the months ahead.

Connect with LCD

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

European Leveraged Finance Market Update - March 2011

  1. 1. European Leveraged Finance Market Update March 2011 Sucheet Gupte - Associate DirectorMonday, March 21, 2011
  2. 2. Copyright 2011 Standard & Poors, a division of The McGraw-Hill Companies, Inc. No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any Text part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&Ps public ratings and analyses are pause made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third party redistributors. Additional information about our ratings fees is available at, March 21, 2011
  3. 3. The Market in February • Issuer-friendly market returns • Loan volume: €3B; bond volume: €2.1B • Loan prices finish month at 99.52; bonds at 105.03 • Loans return 1.28% in February • Cash inflows to investors roll on out • New-issue spreads tighten, reverse-flexes emerge • Default rates continue lowMonday, March 21, 2011
  4. 4. European loan flow name prices, since 2010 100 99.48 as of 17 March 97 Text 95 92 1/7/10 4/8/10 7/8/10 10/8/10 12/30/10 3/17/11 . Source: LCD - Leveraged Commentary & DataMonday, March 21, 2011
  5. 5. European HY bond flow name prices since 2010 105 103.26 as of 17 March 102 99 Text 97 94 91 88 1/28/10 4/8/10 6/17/10 8/26/10 11/4/10 1/14/11 3/17/11 Source: Bloomberg .Monday, March 21, 2011
  6. 6. ELLI Multi-Currency Loan Return (monthly) 3.5% February: +1.28% YTD: +3.98% 2.1% 0.8% (0.6%) Text (2.0%) 1/10 2/10 3/10 4/10 5/10 6/10 7/10 8/10 9/10 10/10 11/10 12/10 1/11 2/11 . Source: LCD - Leveraged Commentary & DataMonday, March 21, 2011
  7. 7. New-issue: Loans vs. HY Bonds, by Month 12 HY bonds Loans 9 Text €billions 6 €2B 3 €3B 0 1/10 2/10 3/10 4/10 5/10 6/10 7/10 8/10 9/10 10/10 11/10 12/10 1/11 2/11 Source: LCD - Leveraged Commentary & Data .Monday, March 21, 2011
  8. 8. ELLI Default Rates – European Leveraged Loans by principle amount by number of defaults 13% 16% 9% 12% 6% 8% 2.30% as of Text 3.96% as of 2/28/11 2/28/11 3% 4% 0% 0% 12/31/07 6/30/09 4/30/10 12/10 12/31/07 6/30/09 4/30/10 12/10 . Source: LCD - Leveraged Commentary & DataMonday, March 21, 2011
  9. 9. The months ahead ... • A market flush with cash (more than €5B in repayments alone) • CLOs looking to deploy cash • With all this liquidity, spreads are easing, reverse- flexes emerging ... out • ... as are repricings, on cross-border deals • Takeouts, A2E, IPO credits emerge • Where’s the new money? • Lack of M&A furthering issuer-friendly marketMonday, March 21, 2011
  10. 10. European Leveraged Finance Market Update March 2011 Sucheet Gupte - Associate DirectorMonday, March 21, 2011