European Leveraged Finance Market Update - March 2011

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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.

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European Leveraged Finance Market Update - March 2011

  1. 1. European Leveraged Finance Market Update March 2011 Sucheet Gupte - Associate DirectorMonday, March 21, 2011
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  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

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