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Leveraged loan market analysis (Europe) - December 2011


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November was uneventful month, Eurozone crisis contained activity, and the high yield bond marked slowed. Default rates were stable in November, though many expect them to rise in the new year.

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Leveraged loan market analysis (Europe) - December 2011

  1. 1. TextEuropean Leveraged Finance Market Update December, 2011 Sucheet Gupte - Director
  2. 2. The Market in NovemberText • Uneventful month, Eurozone crisis slows activity. Secondary markets for loans and high yield bonds fall. Risk off, as lenders wind down for the end of the year. • November was an uneventful month for primary loan market activity, dominated by small, club-style transactions. • The high-yield bond market halted, as only three bonds price in November. • Default rates stable in November though most people expect them to rise in the new year.
  3. 3. European loan flow name prices, 2011 100 99 97 Text 96 94 93 91 2/18 4/1 5/13 6/23 8/4 9/15 10/27 12/15 1/7. Source: LCD - Leveraged Commentary & Data
  4. 4. European HY bond flow name prices, 2011 105 101 97 93 Text 89 85 81 1/7 3/11 5/13 7/14 9/15 12/8 Source: Bloomberg.
  5. 5. ELLI Multi-currency loan return (monthly) 3.5% November 2011: - 0.67% Text October 2011: +1.73% YTD: + 0.03% 2.4% YTD ’10: + 7.14% 1.3% 0.2% (0.9%) 2/10 4/10 6/10 8/10 10/10 12/10 2/11 4/11 6/11 8/31 11/30. Source: LCD - Leveraged Commentary & Data
  6. 6. New-issue: Loans vs. HY bonds, by month 12 HY bonds Text Loans 9€billions 6 3 €0.8B 0 €1.2B 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11 9/11 11/11 Source: LCD - Leveraged Commentary & Data .
  7. 7. ELLI Default rates – European leveraged loans by principle amount by number of defaults 13% 16% 9% 12% 6% 8% Text 3% 4% 0% 0% 12/07 9/09 10/10 11/11 8/08 8/09 8/10 11/11. Source: LCD - Leveraged Commentary & Data
  8. 8. European Leveraged Loan Outstandings Maturity Profile As of 2007 As of 2008 As of 2009 As of 2010 As of October 2011 51 Text 34 17 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source:, S&P European Leveraged Loan Index (ELLI).
  9. 9. Looking Ahead• Drastic changes continue in market.• Leveraged finance issuance down only slightly year over year ...• … though down wildly from the go-go era of 2007. out• Role-reversal continues: bonds issuance continues to dominate loans.• All eyes on Europe• 2012? Volatility is the word, with challenges and opportunities.
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