May 2012, European Leveraged Loan Market Analysis


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After Greece's restructuring, the market regained its confidence and players were willing to again take risks. Inflows and volume were positive, while the secondary market finished the month down a bit.

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May 2012, European Leveraged Loan Market Analysis

  1. 1. TextEuropean Leveraged Finance Market Update May, 2012 Sucheet Gupte - Director
  2. 2.
  3. 3. European Market TrendsText Market slowdown, with the sovereign debt crisis returning to center stage in April ... • Primary Market: Both loans and bonds saw a lack of substantial activity. • Secondary Market: Both loan and high yield bonds bids fell in the secondary. • Default rates fell during the month though are expected to rise during the year.
  4. 4. European Loan Flow Name Prices 100 99 97 Text 96 94 93 91 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 4/12. Source: LCD - Leveraged Commentary & Data
  5. 5. European HY Bond Flow Name Prices 106 102 98 94 Text 89 85 81 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 4/12. Source: Bloomberg
  6. 6. ELLI Multi-currency Loan Return (monthly) 3.0% April 2012: +0.24% Text March 2012: + 0.99% Jan-Apr 2012: + 4.62% Jan-Apr 2011: + 4.78% 1.8% 0.5% (0.8%) (2.0%) 2/10 4/10 6/10 8/20 10/10 12/10 2/11 4/11 6/11 8/11 10/11 12/11 2/12 4/12. Source: S&P European Leveraged Loan Index
  7. 7. ELLI Returns for PIIGS vs. Non-PIIGS ELLI performs in line with broader markets:. Source: S&P European Leveraged Loan Index
  8. 8. New-issue: Loans vs. HY Bonds (monthly) 12 HY bonds - Jan-Apr 2012 = 36% lower than 2011 Text Loans - Jan-Apr 2012 = 48% lower than 2011 9€billions 6 3 €1.4B €1.4B 0 3/11 4/11 5/11 6/11 7/11 8/11 9/11 10/11 11/11 12/11 1/12 2/12 3/12 4/30 . Source: LCD - Leveraged Commentary & Data
  9. 9. Cross-Border Leveraged Finance Volume 30.0 European borrowers going to US US borrowers going to Europe 22.5€billions 15.0 7.5 0 2007 2008 2009 2010 2011 Jan-Apr 2011 Jan-Apr 2012 . Source: LCD - Leveraged Commentary & Data
  10. 10. ELLI Default Rates – European Leveraged Loans Default Rate by Principal Amount Default Rate by Issuer Count 16% 16% 12% 12% 8% 8% Text 4% 4% 0% 0% 2/09 3/10 4/11 4/12 2/09 2/10 2/11 4/12. Source: LCD - Leveraged Commentary & Data
  11. 11. Looking Aheadout • Sovereign debt crisis encourages opportunistic transactions during periods of ‘risk-on’. • Issuers will continue to tap US market, and will perform bond-for-loan takeouts. • Some arrangers more comfortable underwriting senior secured bridge loans to high yield, then flexing and structuring capital structure. • The flow of amendment requests from issuers will continue. • May could prove to be yet another bumper month for inflows.
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