content

Europe/Trump: Bankers Optimistic on Primary Issuance as Markets Pare Early Losses

European markets are shrugging off their knee-jerk reaction to Trump’s victory in the U.S. Presidential Election, with many asset classes now starting to pare their early losses.

Credit seems to be slightly outperforming equities, and leveraged finance traders say that while secondary prices were marked down a point or more early in the session, the lack of actual selling has seen prices recover. Moreover, bankers are optimistic that primary activity in Europe will be largely unaffected by the result.

Equity markets reacted fastest and hardest to the news. The Nikkei shed nearly 5.5%, illustrating how bearish the market tone was first thing. The FTSE 100 initially fell more than 100 points, but is now slightly in the green, while the Eurostoxx was down more than 2%, and is now just 1% in the red.

All eyes will now be on the U.S. market open, and here the futures are indicating a sharp move south. The Dow Jones Industrial Average is forecast to open more than 300 points, or roughly 2%, lower (note though, that as reported the futures market was projecting a 400-point fall earlier this morning).

Safe-haven assets meanwhile are seeing their rally fade a little. The Bund yield was five basis points tighter earlier in the session, but is now two basis points tighter, at 17 bps. The gold price is up 2.25%, having been roughly 2.5% higher in early trading.

The iTraxx Crossover is a touch wider than at the open, having now moved out 12 bps to 338, but secondary prices show credit is outperforming equities. Indeed, loan traders across the board say the market opened a little softer, but has now reversed its losses, and there were no forced sellers.

If anything, market participants are frustrated that their hoped-for buying opportunities did not materialize. “Not many sellers are appearing, and we were hoping for some opportunities,” commented one trader. “Some loans were initially down a quarter- to half-point, but quickly got back to where they were, and offers are static because there’s a queue of people looking to buy paper.”

“Loans were half a point down, but are now back to where they were last night,” confirms another market participant. “U.S. equity futures are down, but that was all very short-lived, and now high-yield is back to normal. We are even seeing some investors that have gone in this morning looking for bargains, but are now having to lift offers.”

High-yield secondary players paint a similar picture. “Initially we saw the Street trying to mark prices down, but there has been limited trading at lower levels,” said one buysider. “There is no panic-selling, and everything is very measured and orderly. Prices are coming back now, and any trading is not far off yesterday’s closes as credit outperforms equities. You have to remember too that we have CSPP and CBPS, which limits any widening. Given how muted the market reaction is, it wouldn’t surprise me to see issuance quite soon.”

As for primary, all eyes will now turn to the cross-border loan financing from Genesys, which held bank meetings on Monday and Tuesday, but has deliberately waited for the outcome of the U.S. election to release price guidance. Meanwhile in the bond market Perstorp is also out with a cross-border offering. It is roadshowing until next Monday, and so has plenty of time to gauge the market reaction.

As to whether more new issues will follow, bankers sound fairly confident that just like secondary, concerns will be shrugged off quickly — in the short-term at least. Earnings season may keep a lid on high-yield supply in the near term, while bankers suggest that how rates move in response will be a key factor in year-end supply.

“I don’t think the result has a big impact on the market’s ability to do deals, but the big question will be what happens to rates, as I would expect most pre-year-end issuers to be sensitive to double-Bs and rates,” comments a banker.

Meanwhile loan bankers are optimistic that the near-term pipeline remains in place, but admit it’s too early to truly gauge how supply will impacted. “Generally I agree that the loan pipeline should continue to come through, though I think it’s too early to really tell,” said one banker. “European credit is still well-bid, but we will have to see when the U.S. shows up. I think loan deals can still go ahead, though transactions might require some tweaks to pricing.” — Staff reports

Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

Top Leveraged Finance Links – Oct. 24, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Try LCD for Free! News, analysis, data.

Follow LCD News on Twitter.

LCD 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.

content

Brexit Worries? 3Q European Loan Issuance Matches 2Q Output

european leveraged loan issuance

As the third quarter got underway the U.K.’s shock decision to leave the E.U. was widely expected to plunge markets into volatility, and the leveraged loan primary into an extended period of inertia that would be compounded by the summer break. However, such fears all proved unfounded.

Total loan volume of €14.6 billion has been raised in the third quarter (through Sept. 16), which is only slightly down on 2Q’s tally of €16.7 billion, and higher than every quarter preceding that back to 2Q15.

Even more encouragingly, the €12.5 billion of institutional loan supply in the third quarter is the largest such reading since the third quarter of 2014, and is up 7% on 2Q. – Luke Millar

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

Europe: As Issuers’ Market Heats Up, Leveraged Loan Repricings Surge

european leveraged loan repricings

A wave of repricings has hit the European leveraged loan market, with participants noting that more issuers will look to take advantage of strong demand and insufficient supply to cut their cost of capital.

Already this month SIG Combibloc, Orion Engineered Carbons, and Constantia Flexibles have launched amendments to reprice their existing facilities, while Western Digital and Styrolution have launched deals to refinance debt at lower margins.

Last week, Armacell repriced its existing TLB, not only upsizing the facility by €45 million on the back of strong investor demand, but also reverse-flexing the amendment to push pricing even tighter. – Nina Flitman

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

After Impressive July, European Leveraged Loans Return 0.66% in August

european leveraged loan returns

European leveraged loans returned 0.66% in July. That’s down significantly from the impressive 1.41% in July – when the market rebounded from the Brexit-vote drubbing it took in June – and is in line with the May numbers (these exclude gains/losses re currency).

Through August, leveraged loans in Europe have returned 4.01% in 2016, slightly ahead of the asset class’ performance last year. – Staff reports

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

As CLO Market Shifts Gears, European Leveraged Loan Spreads Shrink in July

european loans STM

With technicals heating up in the European leveraged loan market, all-in spreads for new-issue single-B rated leveraged loans shrank to E+491 in July from E+563 in 2016’s second quarter, and from E+601 in the first quarter, according to LCD, an offering of S&P Global Market Intelligence.

One factor driving the market last month: Relatively strong CLO issuance, which reached a “2.0 era” high of €4.56 billion in the second quarter. – Staff reports

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

S&P: European Leveraged Finance Mart Shrugs Off Brexit Vote as Borrowers’ Market Persists

The European leveraged finance markets have held up extremely well since the shock of the U.K. electorate’s vote to leave the EU, according to a report published on Monday by S&P Global Ratings entitled ‘Borrower-Friendly Credit Conditions Endure As The European Leveraged Finance Market Shrugs Off Brexit Uncertainty’.

The high-yield bond market has come back to life after a three-week closure due to the referendum, says S&P. Meanwhile, the result of the Brexit vote barely disrupted the leveraged loan market, and the shortage of new issuance so far in 2016 is even giving some private equity sponsors an opportunity to take dividends, S&P adds.

S&P says much of the resilience in the capital markets can be attributed to stimulus measures such as the European Central Bank’s (ECB) Corporate Sector Purchase Programme (CSPP), and will be aided further by the recently announced corporate bond asset purchase scheme (CBPS) from the Bank of England.

European CLO issuance topped €5 billion in July. That's the most in one month during the '2.0 CLO' era.

European CLO issuance topped €5 billion in July. That’s the most in one month during the ‘2.0 CLO’ era.

Credit conditions for borrowers became much friendlier in the second quarter of 2016, with an uptick in loan repricing transactions, according to S&P, and the agency expects the European leveraged finance loan and bond markets to remain favourable for borrowers since the need for new funding — driven by mergers and acquisitions (M&A) activity — remains lower than investor demand. This is largely the result of trade buyers continuing to dominate the M&A playing field, making it tough for private equity sponsors to compete with them on valuations and thereby reducing the need for new finance, the report adds.

S&P goes on to say that while borrowers have taken this opportunity to refinance expensive subordinated debt with cheaper senior secured issuance, the result has been an increase in the amount of senior leverage in loan-funded transactions. This move is reflected in the reduction S&P has observed in the percentage of deals with ‘6’ recovery ratings and an increase in those with ‘2’, ‘3’, and ‘4’ recovery ratings this year.

Improvements in borrowing conditions could result in a new wave of refinancings, repricings, and maturity extensions, but this could also enable private equity sponsors to achieve less-stringent transaction terms, S&P warns. Companies’ leverage could also increase, S&P says, and although overall debt-to-EBITDA multiples haven’t risen in 2016, senior leverage has continued to climb to its highest level since 2007.

However, rather than the borrower-friendly conditions extending to companies further down the credit scale, S&P predicts investors will remain focused on issuers’ credit quality, and will continue to push back selectively on terms they deem too generous or risky.

The report is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280, or sending an e-mail to [email protected]. — Luke Millar

Follow Luke and LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

European Leveraged Loans Gain 0.02% Yesterday; YTD Return: 3.54%

The European Leveraged Loan Index (ELLI) gained 0.02% yesterday (excluding currency).

The ELLI has returned 0.21% thus far in August. The total return for the ELLI in the year to date is 3.54%. — Staff reports

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

European Leveraged Loans See Post-Brexit Rebound in July

european leveraged loan returns

European leveraged loans tracked by the S&P European Leveraged Loan Index (ELLI) gained 1.41% in July, not only recovering from the 0.6% Brexit-related loss in June, but producing the strongest return in four months.

This is the second time in 2016 that the loan market has demonstrated its resilience with a swift bounce-back — the Index gained 1.7% in March following a 1.22% loss in February, driven by spell of volatility across capital markets. – Staff reports

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, 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.

content

S&P: 107 Global Corporate Defaults so far in 2016

defaults by region

The global corporate default tally has grown to 107 as of yesterday, compared to 68 at this point in 2015, according to S&P Global Fixed Income Research. The last time the corporate default count was this high? In 2009, when there were a whopping 194.

The bulk of the 2016 defaults – 72 – come from the U.S., according to S&P. – Staff reports

This analysis is part of S&P Global Fixed Income’s weekly default analysis, which also details default by sector, a list/xls of 2016 defaults, and other analysis. It is available to S&P Global Credit Portal subscribers here.

Follow LCD News on Twitter. LCD is a an offering of S&P Global Market Intelligence