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European Leveraged Loan Market Reaches Record Size

europe leveraged loans outstanding

The leveraged loan market in Europe hit a milestone last month.

The volume of institutional loans outstanding in S&P’s European Leveraged Loan Index (ELLI) has risen to €150 billion, the largest figure on record.

At this level, the volume of institutional loans in the ELLI in March 2018 outstripped the prior high of €148 billion, seen in October 2008. The current ELLI also contains the highest number of issuers on record, at 269, topping the 261 seen last year.

The ELLI has seen a sustained period of growth since 2016, with the volume of new issues in the market hitting a post-crisis high last year, with some €100.7 billion of institutional activity. This rate of activity has continued into 2018, with institutional new-issue volume in the first three months of the year already outstripping the amounts seen in some full years in the aftermath of the crisis. –

Through the first three months of the year the European Leveraged Loan Index has returned 0.73%, after a lacklustre March, when it returned a slim 0.06%. – Nina Flitman

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Video: European Leveraged Loan Market Anlaysis

europe video 3.18In this month’s Capital Markets View video, LCD’s Taron Wade and S&P Global’s Chris Porter talk about the main trends in the European leveraged loan market.

Discussed this month:

  • European leveraged finance volume is very strong as the market approaches quarter-end, beating the YTD tally notched up in 2017, which was a record year. The overall volume figures also show European levfin remains dominated by loan supply, at the expense of bonds.
  • The new-issue volume seen in 1Q also reflects an uptick in M&A-related activity and new-money supply, as more than 60% of the volume came from new deals.
  • Accordingly, European repricing volume was much lower this quarter, while the U.S. equivalent is down YoY but still high on an absolute basis. Yields backed up in both markets, but higher LIBOR (than Euribor) means spread compression doesn’t impact yields as much in the U.S.
  • Average pricing on TLBs is edging higher, driven both by niche deals needing to offer more yield, and larger syndications pricing to clear the market.
  • Average institutional tranche sizes have increased as M&A has picked up, and this also suggests Europe’s more-mature market can now absorb larger loans.
  • Debt-to-EBITDA ratios are above 5x YTD in 1Q18, amid more senior-heavy deals. Larger deals can carry more leverage.
  • The CLO market has enjoyed a very strong start to the year, though there’s been a slight hiatus at quarter-end. The arbitrage remains attractive for managers, as while AAA spreads are little wider, loan spreads have also backed up.

The URL for the video: https://www.spratings.com/en_US/video/-/render/video-detail/capital-markets-view-march-20-1

Taron Wade heads up LCD’s European Research efforts. Chris Porter is Head of Loan Recovery & CLO Business Development, S&P Global.
As ever, please feel free to contact Taron or Chris if you’d like a particular topic discussed in next month’s video.

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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European CLO Issuance Sees Record First Quarter

european CLO issuance

CLO issuance in Europe for the quarter through March 20 is €5.45 billion, and with a further two transactions likely to close out before quarter-end, 1Q18 would be the busiest first quarter of a year ever for this market, according to LCD.

It would also be the second-largest quarterly new-issue volume in the post-financial crisis “CLO 2.0 era” (the largest such tally is €7.7 billion, recorded in 4Q17).

These are important numbers for the leveraged loan asset class, as CLOs comprise a critical part of the investor base, in both Europe and U.S., often driving activity in that sector.

Of course, as more investors pile into the global CLO market – eyeing what historically have been relatively rich returns – spreads on these deals have dwindled, often testing record lows throughout 2017, and into 2018. – Staff reports

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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M&A Takes Charge in Europe’s Leveraged Loan Market

european loan volume

M&A activity is driving issuance in the European leveraged loan segment so far in 2018.

So far this year there have been €8 billion in loans backing leveraged buyouts launched to the syndications market, along with €9 billion supporting other M&A. That total, €17 billion, makes up the lion’s share of the €27.4 billion in overall issuance, according to LCD.

And although the market has clearly seen the return of big deals, such as those for ProSieben (€7.3 billion), Wind Telecomunicazioni (€7.2 billion), and TDC A/S (€7.2 billion), M&A-related volume is not only comprised of the headline transactions.

Indeed, this year has seen a steady stream of smaller-scale buyout and acquisitions, along with secondary buyouts. These include the buyouts of Flamingo with a term loan of €280 million, the €195 million TLB backing Cinven’s buyout of Planasa, and Equistone Partners’ sale of E. Winkemann to Cathay Capital Private Equity.

Buy and build has also been a feature of the market, with Nordic Capital’s acquisition of three dental chains in the Netherlands, Switzerland, and Germany, and the €375 million total financing backing Ardian’s buyouts of Spanish bread and bakery companies Berlys and Bellsola. – Taron Wade

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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10 Years After the Credit Crisis – A Free Event From LCD and S&P Global Market Intelligence

interest coverage
LCD and S&P Global Market Intelligence are pleased to present an in-depth look at how today’s leveraged finance market compares to that of 2007–08, before the onset of the credit crisis.

This complimentary, in-person event will feature analysis from high-yield bond market expert Martin Fridson and LCD’s Marina Lukatsky, as well as a discussion on the state of today’s market, featuring Crescent Capital Managing Director Jonathan Insull, LSTA Executive Director Lee Shaiman, Progow Executive Chairman Peter Gleysteen, and LCD Senior Editor/CLO market reporter Andrew Park. The panel will be moderated by LCD Managing Director Ruth Yang.

This event will be held at S&P Global U.S. headquarters at 55 Water Street in Manhattan on March 27, at 4 pm EDT, and will be followed by a cocktail reception. Space is limited so kindly register by March 20.

More info about the event and a link to register is here.

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Video Analysis – European Leveraged Finance Market: February 2018

In this month’s Capital Markets View video, LCD’s Taron Wade and S&P Global’s Chris Porter talk about the main trends in the European leveraged loan market.

Discussed this month:

  • S&P Global’s Analyst Survey highlights regional variations in the economic cycle, which could impact the market as the year progresses. By industry the survey shows Commodities at the bottom of the cycle, with Autos and Real Estate at the top, while retail is showing a 56% slowdown — which chimes with negative headlines for some leveraged retail credits.
  • European non-sponsored leveraged loan volume was higher in 2017 than in 2007, and non-LBO deals were a substantial part of the acquisition mix. Along with LBOs, all this activity signals a sense of optimism in the European market.
  • High-yield bonds made a significant contribution to overall levfin volume in 2017, amid strong demand driven by CSPP. However, loan-only financing was at record highs in the U.S. and Europe — at 71% and 59%, respectively — showing that it’s still a loan-dominated market in terms of borrowers’ financing structures.
  • Loan spreads for euro-denominated TLBs ticked higher in January, helped by a broader mix of deals and some storied credits.
  • CLO spreads meanwhile have compressed, especially in Europe, which has seen prints below 70 bps on the AAA part of the stack.
  • Rising LIBOR is a measure to watch this year amid the prospect of further rate rises, as it will impact the overall YTM on deals.

The URL for the video: https://www.spratings.com/en_US/video/-/render/video-detail/capital-markets-view-february-2018

Taron Wade heads up LCD’s European Research efforts. Chris Porter is Head of Loan Recovery & CLO Business Development, S&P Global.

As ever, please feel free to contact Taron or Chris if you’d like a particular topic discussed in next month’s video.

Try LCD for Free! News, analysis, data

Follow LCD on Twitter.

LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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PE Shops Look To Europe High Yield Mart for M&A, LBO Deals

europe hy PE

Private equity shops are accessing the European high yield bond market at a rapid clip so far in 2018, with an emphasis on M&A and LBO transactions, according to LCD. Through Feb. 15 there had been nearly €2.5 billion in European high yield deals backing these purposes, more than in any similar period of a year in recent memory.

Sponsors are turning to bonds in Europe largely because of that market’s considerable tolerance for risk, sources say, be it a willingness to take on storied credits or those from less-liked sectors, according to LCD’s Luke Millar.

Some of the M&A-related offerings so far this year:

  • A €1.45 billion-equivalent issue backing KKR’s Selecta, a self-serve coffee concern (there was a large refinancing component here, as well)
  • a €660 million-equivalent issue for credit-management service Lowell, backing the acquisition of a carve-out business from Intrum (Permira is the deal sponsor).

Try LCD for Free! News, analysis, data

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Free LCD/S&P Global Market Intelligence Webinars

The Global Credit Markets – 10 Years After the Credit Crunch

LCD and SP Global Market Intelligence are pleased to present a free replay of our in-depth analytical look at how today’s leveraged finance market compares to that of 2007–08, before the onset of the credit crisis: 10 Years Down the Road: The U.S. Leveraged Finance Markets, Then vs Now

This in-person complimentary event features analysis from high-yield bond market expert Martin Fridson and LCD’s Marina Lukatsky, as well as a discussion on the state of today’s market, featuring Crescent Capital Managing Director Jonathan Insull, LSTA Executive Director Lee Shaiman, Progow Executive Chairman Peter Gleysteen, and LCD Senior Editor/CLO market reporter Andrew Park. The panel is moderated by LCD Managing Director Ruth Yang.

A link for the replay is here.
The replay is free, and after registering for the presentation users can download the slides used for the analysis. These include:

  • A brief history of the leveraged finance market, over the past 10 years (Yang)
  • A look at credit quality progression in the high yield bond market (Fridson)
  • The effect of record-low volatility (?) and reduced liquidity in the high yield market (Fridson)
  • Evolution of the US leveraged loan mart: size, issuer quality, covenant-lite (Lukatksy)
  • Risk vs Reward: Now, compared to pre-Lehman (Lukatsky)
  • That state of the CLO market (Shaiman, Gleysteen, Park)

Global High Yield Markets: 2017 Review/2018 Outlook

January 23, 2018

Featuring LCD’s high yield expert Martin Fridson. Some of the topics covered:

  • Yields
  • Return vs risk, by asset category (with surprising results re distressed debt)
  • Total return, by industry
  • Default rate forecast
  • Poll: Will US HY spreads go up/down/unchanged in 2018?

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As well, the webinar features reviews/outlooks of the U.S. leveraged loan market, along with the European high yield and leveraged loan markets.


 

Leveraged Finance Yields (and CLOs): How Low Can They Go?

July 12, 2017

Featuring LCD CLO reporter Andrew Park. Some of the topics:

  • A look at record-low yields in the leveraged loan market
  • Analysis of loan market supply (new loan issuance) vs Demand (retail investment + CLO issuance)
  • Specifics on CLO formation
  • Cost of borrowing: US (cheap) vs Europe (not cheap)
  • Why CLOs are attractive investments

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Cineworld Sets Bank Meetings for $4B Cross-Border Term Loan Backing Regal Entertainment Buy

Cineworld has launched its $4.007 billion cross-border acquisition term loan ahead of a London bank meeting tomorrow and a New York presentation on Monday. Barclays and HSBC are global coordinators, and replies are due by Feb. 5.

Ahead of launch, lenders had been warmed up through a save-the-date invitation on Monday. The cov-lite term loan is split between dollar, euro, and sterling tranches guided at L+275, E+300, and L+350, respectively. All tranches come with 0% base-rate floors, 1% amortisation, and six months of soft-call protection at 101. OID talk will follow, and a $300 million five-year revolver with a springing covenant rounds out the loan financing. Barclays is lead-left in the U.S., with HSBC taking the lead on the euro and sterling tranches.

Proceeds fund Cineworld’s acquisition of Regal Entertainment, and refinance debt. Cineworld agreed to buy Regal in a $3.6 billion deal announced in December, that will also be funded through a £1.4 billion rights issue. Cineworld detailed that 4-for-1 offering today, in a placing that will leave the combined entity with a leverage multiple of roughly 4x pro-forma adjusted EBTIDA.

The loan will have a public rating and there is a preliminary corporate and issue rating from S&P of BB-, with a 3 recovery rating.

The package also refinances debt at both Cineworld and Regal. The latter is an existing leveraged borrower, having completed a $954 million loan repricing and $150 million add-on in May priced at L+200 with a 0% floor. Prior to this deal, London-listed Cineworld was funded through bank facilities.

Cineworld was founded in 1995, and listed in 2007. The Greidinger family has a roughly 28% holding in the group, and will fully participate in the rights issue through Global City Holdings, according to today’s statement. The enlarged group will have 793 sites and 9,542 screens. Combined revenues for the LTM at June 2017 are £3.2 billion, for an adjusted EBITDA of £673 million and margin of 20.8%. — David Cox/Nina Flitman

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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European Leveraged Loan Issuance Hits Post-Crisis High

European leveraged loan issuance

Total leveraged loan volume in the European syndications market finished the year at €120.4 billion — its highest level since 2007, when the full-year supply hit €165.5 billion, according to LCD.

This marks a whopping 73% increase over 2016, illustrating just how busy the market was all year (apart from a typical few weeks’ lull in August). In fact, bankers and investors say they can’t recall a time when they were so busy in December.

With investor appetite for loan paper strong throughout 2017, opportunistic transactions – refinancings of existing debt and credits backing dividends to private equity shops –  comprised the bulk of activity for the year, at 59% of overall volume, split 15% for recaps and 44% for refinancings.

This compares with a 45% share of the overall volume for opportunistic transactions in 2016, and a 37% slice in 2015.

Leveraged loans are undertaken by riskier borrowers – those rated BB+ or lower – and typically have higher yields than investment grade debt, making them attractive to a certain class of institutional investor. – Taron Wade

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LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.