March 2013, European Leveraged Loan Market Analysis


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Loan issuance was down at €3B in February, while high yield issuance was steady at €7.4B. Secondary markets are up. Repricings are back on table, February’s tally was the highest number of purely European repricings in any month on record. Europe had its first new arbitrage CLO pricing since the crisis in 2007.

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March 2013, European Leveraged Loan Market Analysis

  1. 1. TextEuropean Leveraged Finance Market Update March, 2013 Sucheet Gupte - Director
  2. 2. European Market TrendsText • Loan issuance was €3.03B in February 2013; high yield issuance was €7.4B . • Estimated outflows out of European HY funds was €220M for the four weeks ending February 28th. • Secondary markets were up: loan markets went up 5 bps to finish the month at 99.47; high yield markets were up 19 bps to finish the month at 102.3. • The S&P European Leveraged Loan Index (ELLI) finished the month up 0.4%. • Default rates were mixed -- default rates by principal amount rose; default rate by issuer count fell.
  3. 3. European Loan Flow Name Prices 100 99 Text 97 96 94 93 91 2/11 4/11 6/11 8/11 10/11 12/11 2/12 4/12 6/12 8/12 10/12 12/12 2/13. Source: LCD - Leveraged Commentary & Data
  4. 4. European HY Bond Flow Name Prices 106 102 Text 98 94 89 85 81 2/11 4/11 6/11 8/11 10/11 12/11 2/12 4/12 6/12 8/12 10/12 12/12 2/13. Source: Bloomberg
  5. 5. ELLI Multi-Currency Loan Return 2.5% February 2013: + 0.40% Text January 2013: + 1.18% Jan-Feb 2013: + 1.59% Jan-Feb 2012: + 3.34% 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 10/1211/1212/12 1/13 2/13. Source: S&P European Leveraged Loan Index
  6. 6. Volume: New-issue Loans vs. HY Bonds 15 HY bonds Text Loans 11€billions 8 €7.4B 4 €3.03B 0 11/1112/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/1211/1212/12 1/13 2/13 . 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 2/13 2/09 2/10 12/11 2/12 2/13. Source: LCD - Leveraged Commentary & Data
  8. 8. Themes to watch forText • Repricings are back on table, as issuers take advantage of strong demand. February’s tally was the highest number of purely European repricings in any month on record. • Along with repricings, some sponsors are tabling dividend recap deals to take advantage of investor demand. • Still strong demand for high yield bonds. • Bond for loan-take-outs will continue to keep pace as issuers address their maturity concerns. • Cairn priced its €300.5M CLO, the first new arbitrage CLO in Europe since the crisis. There are signs about pricing new CLOs. • There is renewed optimism about M&A.
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