July 2012, European Leveraged Loan Market Analysis


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The European leverage finance market was cautious in June with the markets being driven by fundamental credit selection rather than technicals.

In this month's analysis:
* Loan flow name prices
* High yield bond flow name prices
* ELLI loan returns
* New-issue loans vs high yield bond volume
* ELLI default rates, European leveraged loans
* Trends for the months ahead

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* Leveraged finance job postings
* Online Loan Market Primer
* LCD News
* Market Stats

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July 2012, European Leveraged Loan Market Analysis

  1. 1. TextEuropean Leveraged Finance Market Update July, 2012 Sucheet Gupte - Director
  2. 2. European Market TrendsText • Leveraged finance market was cautious in June • In high yield arena, appetite for well-established 4B rated issuers • Loan issuance slid from €5.3 billion to €2.5 billion • Loan prices fell in the secondary market; high yield bond prices rose • Default rates rose during the month
  3. 3. European Loan Flow Name Prices 100 99 97 96 Text 94 93 91 1/11 2/11 4/11 5/11 6/11 8/11 9/11 10/11 12/11 1/12 2/12 4/12 5/12 6/12. Source: LCD - Leveraged Commentary & Data
  4. 4. 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 6/12. Source: Bloomberg
  5. 5. ELLI Multi-Currency Loan Return (monthly) 3.0% June 2012: + 0.29% Text May 2012: + 0.10% Jan-June 2012: + 4.93% Jan-June 2011: + 4.31% 1.8% 0.5% (0.8%) (2.0%) 2/10 4/10 6/10 8/10 10/10 12/10 2/11 4/11 6/11 8/11 10/11 12/11 2/12 4/12 6/12. Source: S&P European Leveraged Loan Index
  6. 6. New-issue: Loans vs. HY Bonds (monthly) 12 HY bonds Text Loans 9€billions 6 3 €1.48B €2.5B 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 4/12 5/12 6/12 . 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 3/10 4/11 6/12 2/09 2/10 2/11 6/12. Source: LCD - Leveraged Commentary & Data
  8. 8. Looking Aheadout • The European sovereign crisis finale not yet played, we are still some distance from the closing credits • Possible inflows into high yield bond funds on back of interest rate cuts by ECB; tentative stability in the secondary markets • A-to-E to continue: issuers seek to address maturity concerns, though issuers that come to market are weaker • Issuers will continue to seek to tap US market for both loans and bonds, market permitting
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