Category Archives: Europe

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at 12:16pm

May 2013 European Leveraged Loan Market Analysis

May 2013 European Leveraged Loan Market Analysis

An overview of the past month:

  • Loan issuance was €6.7 billion in April 2013, while high yield issuance was €6.5  billion.
  • According to JP Morgan HY research: estimated inflows into European HY funds was €543 million for April. This brings year-to-date inflows at €2.9 billion.
  • Secondary markets were up, loan markets went up 72 bps points to finish the month at 100.58 while high yield markets were up 206 bps to finish the month at 104.63.
  • The S&P European Leveraged Loan Index (ELLI) finished the month up 0.88%.
  • Default rates stayed level.

Focusing on the secondary loan market, this chart details the average price of LCD’s European Loan flow name composite – a measure of the 12 largest, most liquid loans (consisting of 10 issuers) – since 2002.

Secondary loan prices rose 72 bps to finish the month at 100.58. The increase brings the average flow names up to a fresh peak since the beginning of July 2007. Since bottoming out at 60.23 at the end of 2008, the average has now recovered to pre-crisis levels, having added more than 40 points over the last 52 months. The current bid is now 324 bps higher than the final reading of 2012.

This next chart details the average price LCD’S European High Yield Flow name composite – a measure of the 12 most liquid high yield issues – since the beginning of the year 2010.

The high yield market finished the month at up 206 bps at 104.63, just 3 basis points shy of the 2013 high of 104.66 . The average bid is now 167 bps higher in the year to date, having ended 2012 at 102.96.

This chart details the monthly return of the ELLI, a broad measure of European loan market returns that LCD calculates. All returns are ex-currency unless otherwise stated.

The European loan market had a positive return of 0.88% for the month of April (for the week ending May 2nd), down from the 0.91% seen in March . This brings the year-to-date return to 3.50% versus 5.19% for the same period last year.

Now we turn from the secondary to the primary. This graph details new-issue volume for both leveraged loans and high-yield bonds.

April’s leveraged loan new-issue launch pad remained very similar to the prior month’s, consisting of a wave of opportunistic transactions with a tiny dash of buyouts. Out of the €6.7 billion total volume for the month, €5.7 billion came from refinancings, led by the jumbo €2.7 billion pro rata facilities for Schaeffler, and the €1.5 billion TLH and TLE-1 for Kabel Deutschland.  April’s high-yield bond tally reached €6.5 billion, falling a tad short of the roughly €7 billion total seen in each of the prior months. However, this reading by no means signifies a slowdown in issuance, as close to €2 billion of bonds priced in the first two days of May.  For the year to date, European borrowers raised €27.8 billion in the high-yield bond market, more than double the €13.5 billion seen at this time last year, and just €8.5 billion away from the full-year tally for 2012. If issuance continues at the same pace for the remainder of the year, 2013 can easily smash the 2010 record of €44.4 billion.

 

The default rate by principal amount stayed level at 5.9% at the end of April  while the default rate by issuer count fell to 7.1% at the end April from  at 7.2% at the end of March.

 

Themes to watch for going forward

  • CLOs emerge back on the landscape, according to LCD reports, there are 4 vehicles in the pipeline totaling €1.4 billion consisting of vehicles from Alcentra, Blackstone / GSO, Carlyle and ICG. So far this year, 3 vehicles have priced for a total of €964 million from managers Apollo, Cairn and Pramerica.
  • Further spread / yield compression is expected, as loan issuers use access to the high yield markets to reduce existing spreads.
  • Along with repricings, some sponsors are tabling dividend recap deals to take advantage of investor demand, both in loans and high yield.
  • Still strong demand for high yield bonds, so far this year, net inflows stand at €2.9 billion.
  • Bond for loan-take-outs will continue to keep pace as issuers address their maturity concerns.

 

A video of this presentation is available at:


http://youtu.be/Z9KZMgXSQ98

 

Slideshare download is available at:

http://www.slideshare.net/lcdcomps/may-2013-european-leveraged-loan-market-analysis

– Sucheet Gupte

 

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at 11:09am

S&P European Leveraged Loan Index (ELLI) returns 1.16% in April, 3.7% YTD

The secondary market continued on its upward trajectory in April, as the S&P European Leveraged Loan Index (ELLI) returned 1.16% in the month through May 2, its strongest performance since January and the second-highest return in the last 12 months (excluding currency).

 

This chart is part of an LCD News analysis available to subscribers. Other charts in that analysis:

  • Total return by rating (excluding currency)


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at 10:28am

Shedel promoted within BNP Paribas leveraged finance origination business

BNP Paribas has appointed Paul Shedel as head of leveraged finance origination for the Benelux, Nordic, and CEE regions. In his new role, Shedel will report to Geert Lippens, global head of BNPP’s leveraged finance business.

 

Shedel has 20 years’ experience within leveraged finance. He joined BNP Paribas in 2008 after spending the majority of his career at Citigroup in its European leveraged finance group, and a short stint at CIBC. – Staff reports

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at 8:22am

Omers Private equity lines up financing for Civica buyout

Omers Private Equity has agreed to buy Civica, the British provider of computer software to the public sector, from 3i for £390 million. The agreement comes after a keenly fought auction that saw the Canadian buyer win out against final rival bids from Cinven and Vista.

To support the bid Omers has mandated Bank of Ireland, Credit Agricole CIB, GE Capital, and ING to arrange an all senior loan financing, market sources said. Nomura, Weil and Wyvern Partners advised Omers.

During the auction sources put leverage talk for the financing in a 4.5-5x EBITDA context.

Omers said it would now look to support the management team through organic growth and selective acquisitions. Management, led by CEO Simon Downing, will reinvest and continue to lead the business.

3i took Civica private back in 2008, in a £190 million deal backed by a £170 million senior-and-mezzanine loan. A club of banks provided the senior debt, comprising Lloyds, Bank of Ireland, NAB, and RBS. European Capital and Lloyds provided the mezzanine portion.

Civica provides specialist systems and business process services for organisations across the public sector and around the world. The firm supplies more than 2,500 organisations in the U.K., Australia, New Zealand, Singapore, Canada, and the U.S. – David Cox/Sarah Husband

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at 11:46am

S&P European Leveraged Loan Index now available daily

S&P Dow Jones Indices has announced new daily calculation of the S&P European Leveraged Loan Index. Previously, the Index was calculated on a weekly basis.

The S&P European Leveraged Loan Index is a market value-weighted index designed to measure the performance of the European institutional leveraged loan market. The Index consists of over 390 loan facilities and represents over €98 billion in par value.

ELLI screenshot

The weekly version of S&P’s European Leveraged Loan Index. The ELLI will now be calculated daily.

S&P Capital IQ LCD is the source of loan data and the calculation agent. Detailed Index data and analysis is incorporated into LCD’s research tools.

The leveraged loan market consists of loans made to speculative-grade borrowers. The vast majority of loans are senior secured floating-rate paper that the issuer can prepay with little or no restrictions or fees. In this universe, loans are either first-lien or second-lien. As their monikers imply, first-lien loans have a senior claim on collateral, while second-lien loans have a junior claim. In general, loans range in size from €20 million to upward of €9 billion.

For information on sales and research, please contact Marc Auerbach at (212) 438-2703 or Miyer Levy at (212) 438-2714.

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at 9:03am

Leveraged loan prices in European trading market hit post-2007 high

The average bid of LCD’s European loan flow-name composite gained 14 bps during the week ended May 2, to 100.58% of par (based on Markit pricing). The increase brings the average up to a fresh peak since the beginning of July 2007, improving on the high tracked last week. Since bottoming out at 60.23 at the end of 2008, the average has now recovered to pre-crisis levels, having added more than 40 points over the last 52 months. The current bid is now 324 bps higher than the final reading of 2012.

LCD’s broad secondary composite, which reflects a wider universe of deals, rose by 22 bps during the week ended May 2, to 85.16. As a result, the average bid is now 106 bps above 2012’s closing level.


Advancers lead decliners
Advancers led decliners on a month-on-month basis for the period ended May 2, with seven facilities advancing by an average of 78 bps, and one declining by 74 bps.

Over a one-week period, nine facilities advanced by an average of 15 bps, no facilities declined, and one was unchanged.

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at 7:36am

Investco sells Armacell to Charterhouse for more than €500M

Investcorp has agreed to sell Armacell to Charterhouse for more than €500 million, the private equity company confirmed in a statement this morning.

The agreement revives a deal that had looked in jeopardy just a few weeks ago, when sources suggested sponsor Investcorp was looking at a recapitalisation of the firm. The sponsor put Armacell on the block earlier this year and received bids by early March from a mix of private equity and trade buyers, including HgCapital and Pamplona as well as Charterhouse.

The focus will now turn to the debt mandate, which was competitively bid during the auction. Armacell is seen as a steady performer, having delevered from roughly 5.7x at the time of its 2007 buyout to around 3x at the time of the auction.

Investcorp bought Armacell from Gilde and CVC for €400 million, in a deal supported by a €382.5 million senior, second-lien, and mezzanine debt financing. BNP Paribas and CIBC arranged the facilities, which closed oversubscribed allowing for a pricing and structural flex.

Armacell operates 19 manufacturing facilities in 13 countries, and serves 30 countries around the world. Barclays advised Investcorp. – David Cox

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at 9:22am

S&P: Europe’s middle market seeks new ways to fund growth

In a new report entitled “Europe’s Mid-Market Seeks New Ways To Fund Growth”, Standard & Poor’s comments that the development of a more cohesive alternative funding environment for mid-market companies in Europe is becoming more likely as banks continue to deleverage.

The report notes that midsize enterprises are more often seeking to diversify their funding sources as banks – their traditional lenders – embark on a deleveraging process that may take many years. At the same time, investors searching for yield increasingly want to diversify their investments into this new asset class.

However, despite some progress on linking together mid-market companies with willing capital, a cohesive pan-European solution is still elusive, S&P comments.

S&P goes on to say that alternatives, such as the non-bank lending market, private placements, and bond platforms on exchanges, are still in their infancy in Europe. What’s more, such alternatives lack cohesion, and operate in different regulatory and accounting environments.

Moreover, most of the current funding alternatives to bank lending and capital markets fundraising are still dominated by large companies. Of the 1,000 non-financial companies that S&P rates in Europe, only a handful are what S&P defines as mid-market – with revenues between €100 million and €1.5 billion, and outstanding debt between €50 million and €500 million.

As a result, S&P believes that developing an efficient pan-European funding market for these companies will necessitate changes for both issuers and investors. Expanding outside of a long-term banking relationship can be a significant cultural shift for debt issuers, while companies also regard interest rates demanded by institutional investors as too high in many cases, S&P comments. Better access to timely financial information could go some way toward helping investors to diversify into this new asset class, the agency adds.

The full report is titled “Underwriting The Recovery: Europe’s Mid-Market Seeks New Ways To Fund Growth”. Subscribers to RatingsDirect can access the research piece at www.globalcreditportal.com. Alternatively, to purchase/access the report, please contact Client Support Europe: +44 20 7176 7176 or clientsupporteurope@standardandpoors.com. – Staff Reports

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at 12:23pm

April 2013 European Leveraged Loan Market Analysis on YouTube

LCD’s video analysis detailing the European leveraged finance market during March and early April is now on YouTube.

Loan issuance was €4.85B in March, while high yield issuance was a sky-high €8.6B. There is still strong demand for HY, with net inflows this year so far at €2.26B. Secondary markets for March were mixed. There looks to be activity with European CLOs, with several pricings expected in the coming weeks.

This month LCD looks at:

  • Leveraged loan prices
  • High yield bond prices
  • Leveraged loan returns (ELLI Index)
  • New-issue loan vs high-yield bond volume
  • Loan default rate
  • Trends going forward


The video is available here.

PDF slides of the video on Slideshare.

URL for the slides:

http://www.slideshare.net/lcdcomps/eur-aor-2013sldshrv2

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you’ll be certain not to miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email, or here:

http://www.youtube.com/user/LCDcomps

If you’d like to embed any LCD video on a web page or in other digital media, it’s simple via the “embed” button on the YouTube page for the video. You can also embed the slides via Slideshare.

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at 9:28am

Europe: Levett and Agafonova join CVC Credit Partners

Stuart Levett and Julia Agafonova have joined CVC Credit Partners, the firm announced today. Levett joins as a managing director focused on the group’s European trading activity, while Agafonova joins as a director of fund administration and will lead the European operations team.

Levett has spent more than 16 years in banking, most recently as a managing director and senior originator and leverage sales at UBS, and Cantor Fitzgerald responsible, inter alia, for sourcing impaired and distressed single line assets and portfolios, trading through capital structures and asset classes. Prior to that he spent eight years with Credit Suisse and its predecessor Donaldson, Lufkin & Jenrette.

Agafonova has more than 15 years’ experience across financial, operations and administration, and joins from Chalkhill Partners, where she headed operations and business administration. Prior to this, she was the head of middle office and operations at Aladdin Capital Management and at Fusion Asset Management, and spent seven years at J.P. Morgan Chase Bank in operations roles ranging across emerging markets, credit markets, credit derivatives, and structured finance products. – Sarah Husband