January 2013, European Leveraged Loan Market Analysis


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Loan issuance was nil in December, while high yield issuance was €1.5 billion. Secondary markets are up, loan markets went up 51 bps to finish the month at 97.34 while high yield markets are up 223 bps to finish the month at 103.04.

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January 2013, European Leveraged Loan Market Analysis

  1. 1. TextEuropean Leveraged Finance Market Update January, 2013 Sucheet Gupte - Director
  2. 2. European Market TrendsText • December loan issuance was nil, HY issuance was €1.5B. • 2012 loan issuance was €28.5B, HY issuance was €36.4B. • Estimated inflows into HY funds were €245M for December, bringing estimated 2012 year-end number to €7.2B. • Secondary markets were up: Loan markets went up 51 bps to finish the month at 97.34 HY markets were up 223 bps to finish the month at 103.04. • In 2012, secondary loan markets were up 330 bps for the year, HY markets were up 13 points for the year. • The S&P European Leveraged Loan Index (ELLI) finished the month up at 0.72% and the year at 9.48%. • However, default rates climbed higher during the month.
  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 12/12. 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 12/12. Source: Bloomberg
  5. 5. ELLI Multi-Currency Loan Return 2.5% December 2012: + 0.72% Text November 2012: + 0.66% Jan-Dec 2012: + 9.48% Jan-Dec 2011: - 0.02% 1.9% 1.2% 0.6% -0.1% 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. Source: S&P European Leveraged Loan Index
  6. 6. Volume: New-issue Loans vs. HY Bonds 10 HY bonds Text Loans 8€billions 5 3 €1.5B 0 €0B 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 . 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 12/12 2/09 2/10 12/11 12/12. Source: LCD - Leveraged Commentary & Data
  8. 8. Themes to watch forText • Strong inflows into HY funds, resulting in strong demand for HY issuers.• Bond for loan-take-outs will continue to keep apace.• Issuers from the Eurozone peripheral countries continue to access HY markets. Some have made their tax regimes far more amenable for issuers than before.• Sell-side bankers and sponsors are optimistic about M&A provided there are no unexpected shocks to the system.
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