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October 2013, European Leveraged Loan Market Analysis


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The European leveraged finance primary and secondary markets had a strong September. Loan issuance was €3.82 billion in September 2013, while high yield issuance was €7.1 billion for the month. Secondary markets and the S&P European Leveraged Loan Index (ELLI) were up for September, and default rates were markedly lower.

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October 2013, European Leveraged Loan Market Analysis

  1. 1. Text European Leveraged Finance Market Update October, 2013 Sucheet Gupte - Director
  2. 2. European Market Trends Text • The European leveraged finance primary and secondary markets had a strong September. • Loan issuance was €3.82B in September 2013, while high yield issuance was €7.1B for the month. • Secondary markets were up: Leveraged loan markets were up 30 bps to close at 100.13; HY markets were up 132 bps to finish 103.63. • According to JP Morgan HY research: estimated inflows into European HY funds for September are estimated to be €391M, bringing the year to date number to €3.1B. • The S&P European Leveraged Loan Index (ELLI) was up for September, with returns at 1.35%, slightly below the 1.45% seen in August. This brings the YTD return to 6.15%. • Just one CLO priced this month, Carlyle’s Global Market Strategies Euro CLO 2013-2, which was upsized to €336M. • Default rates were markedly lower.
  3. 3. Average Bid for European Loan Flow Name Composites 102 100 Text 98 96 94 92 90 3/11 . 5/11 7/11 9/11 11/11 Source: LCD - Leveraged Commentary & Data 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13 5/13 7/13 9/13
  4. 4. European HY Bond Flow Name Prices 106 102 Text 98 94 89 85 81 3/11 . 5/11 7/11 Source: Bloomberg 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13 5/13 7/13 9/13
  5. 5. ELLI Multi-Currency Loan Return 1.5% September 2013: August 2013: Jan-Sept 2013: Jan-Sept 2012: Text + 1.35% + 1.45% + 6.15% + 7.33% 1.0% 0.6% 0.1% -0.4% 9/12 . 10/12 11/12 12/12 Source: S&P European Leveraged Loan Index 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 9/13
  6. 6. Volume: New-Issue Loans vs. HY Bonds 18 HY bonds Text Loans €billions 14 9 €7.1B 5 €3.8B 0 9/12 . 10/12 11/12 12/12 Source: LCD - Leveraged Commentary & Data 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 9/13
  7. 7. ELLI Default Rates – European Leveraged Loans Default Rate by Principal Amount Default Rate by Issuer Count 16% 16% 13% 13% 10% 10% Text 6% 6% 3% 0% 2/09 . 3% 0% 2/09 2/10 2/11 12/11 Source: LCD - Leveraged Commentary & Data 9/13 2/10 12/11 2/12 9/13
  8. 8. Themes To Watch For Text • The forward calendar for new M&A transactions leaves a lot to be desired. With the end of the year approaching, parties might just hold out on transactions until next year. • CLO forward calendar is still strong. As of last week, LCD counted 7 transactions at €2.4 billion. Even with the increase in new issue CLOs, there is still a significant shortfall that needs to be made up due to the number of CLOs that will be past their reinvestment periods.
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