June 2013, European Leveraged Loan Market Analysis


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Issuance in the primary hit a post credit-crunch high in May, while secondary markets were down. CLO issuance was promising, with more in the pipeline, although new EBA directives threaten to hinder issuance going forward. More spread/yield compression is expected going forward, as issuers play loan and bond investors against each other in search of best terms.

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June 2013, European Leveraged Loan Market Analysis

  1. 1. European Leveraged Finance Market UpdateJune, 2013Sucheet Gupte - DirectorText
  2. 2. European Market TrendsText• The S&P European Leveraged Loan Index (ELLI) finished the month up 0.11%.• Loan issuance was €8.7B in May 2013, while HY issuance was €9.0B.• Secondary markets were down:loan markets were down 17 bps to finish the month at 100.41;high yield markets were down 139 bps to finish the month at 103.24.• Estimated inflows into European HY funds was €975M for May, versus €555M for April.YTD inflows are almost €4B.• Default rates stayed roughly the same.
  3. 3. 9193949698991013/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13 5/13.European Loan Flow Name PricesTextSource: LCD - Leveraged Commentary & Data
  4. 4. .81858994981021063/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13European HY Bond Flow Name PricesSource: BloombergText5/13
  5. 5. 0%0.4%0.8%1.1%1.5%4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13.ELLI Multi-Currency Loan ReturnTextMay 2013: + 0.11%April 2013: + 0.88%Jan-May 2013: + 3.19%Jan-May 2012: + 4.63%Source: S&P European Leveraged Loan Index
  6. 6. .05914184/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13Volume: New-Issue Loans vs. HY BondsHY bondsLoans€billionsTextSource: LCD - Leveraged Commentary & Data€9B€8.7B
  7. 7. 0%3%6%10%13%16%2/09 2/10 12/11 2/12 5/130%3%6%10%13%16%2/09 2/10 2/11 12/11 5/13.ELLI Default Rates – European Leveraged LoansDefault Rate by Principal Amount Default Rate by Issuer CountTextSource: LCD - Leveraged Commentary & Data
  8. 8. Themes To Watch ForText• Given the buoyant equity markets, expect further IPOs from some sponsor-led companies, allowing them toreturn cash back to their LPs.• YTD CLO issuance at €1.34B, with still a few more managers and vehicles on the forward pipeline.However, new directives from the EBA could hinder new CLO issuance.• Further spread / yield compression is expected, as issuers use capital markets to essentially play loaninvestors against bond investors to get the best terms possible.• Global co-mingled funds being launched, combining loans and high yield bonds, with a focus on both US andEurope.
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