November 2012, European Leveraged Loan Market Analysis

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In October, loan issuance shot up to €3.7 billion from €2.3 billion; HY issuance came down to €3.5 billion from €7.2 billion; default rates stabilized. Going forward, no significant changes to the quantative easing policies from the ECB; extremely short window of opportunity before the end of the year.

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November 2012, European Leveraged Loan Market Analysis

  1. 1. out TextEuropean Leveraged Finance Market Update November, 2012 Sucheet Gupte - Director open pause Text
  2. 2. European Market TrendsText • Monthly loan issuance shot up to €3.7 billion from €2.3 billion HY issuance came down to €3.5 billion from €7.2 billion • Positive fund flows totaled an estimated €664 million for October, bringing year-to-date to almost €4.6 billion • Secondary markets up: - Loan markets rise 60 bps to finish the month at 96.35 - HY markets rise 125 bps to finish the month at 99.97 • The S&P European Leveraged Loan Index (ELLI) finished the month up at 0.47% (till the week ending October 25th) • Default rates stabilized during the month
  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. 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. Source: Bloomberg
  5. 5. ELLI Multi-Currency Loan Return 2.5% October 2012: + 0.47% Text September 2012: + 0.63% Jan-Oct 2012: + 7.84% Jan-Oct 2011: + 0.71% 1.8% 1.1% 0.4% (0.3%) (1.0%) 10/11 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12. Source: S&P European Leveraged Loan Index
  6. 6. Volume: New-issue Loans vs. HY Bonds 10 HY bonds Text Loans 8€billions 5 €3.45B 3 €3.68B 0 10/11 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 . 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 10/12 2/09 2/10 2/11 10/12. Source: LCD - Leveraged Commentary & Data
  8. 8. Themes to watch forText • No significant changes to the quantative easing policies from the ECB • More inflows into HY funds on the back stability in secondary markets • Extremely short window for deal opportunity before the end of the year • A-to-E to continue as issuers seek to address their maturity concerns • Bond for loan-take-outs • Issuers from Eurozone peripheral countries continue to access HY markets • European issuers increasingly go to the US • Sponsors will look to tap loan demand for recaps and repricings • Sell-side bankers and sponsors optimistic about M&A during 1Q 2013
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