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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

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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.

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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

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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.

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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

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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.

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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

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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.

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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

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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.

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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

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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.

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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

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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.

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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.

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Beechbrook Capital Raises €100M for Direct Lending Fund

Private debt manager Beechbrook Capital has reached a first close of more than €100 million on its third private debt fund. Private Debt III is targeting €200–250 million in commitments from investors with a hard-cap of €300 million, said managing partner Paul Shea.

The latest vehicle in the series maintains the same investment strategy and will provide private debt, including mezzanine and unitranche, to lower mid-market buyouts in northern Europe.

beechbrookLimited partners in the first close include the European Investment Fund and British Business Bank’s investment arm as well as other European institutional investors. Beechbrook expects to hold a second close at the end of 2016 before the final close, which is now slated for 2017, to allow allocations from next year to come in.

The new fund is an English limited partnership, said Shea, adding that there will be at least two years after the U.K. triggers its departure from the EU before access to the single market becomes an issue. He said that the question of passport access to the EU single market wasn’t flagged as a major issue by investors ahead of the close.

Of more concern to investors, Shea said, was the short-term impact of Brexit on the U.K.’s economic outlook. The lower mid-market, Beechbrook’s specialty, is relatively insulated from the fallout focusing more on micro issues. Potential falls in asset prices could limit appetite for mezzanine debt, but that is balanced out by lower availability of senior debt and potential for improved returns from Beechbrook’s equity kickers, he added.

Beechbrook’s private debt fund focuses on European private equity–sponsored businesses with turnover between €10–100 million. Its loans generally range from €5–15 million per transaction and support acquisitions, shareholder re-alignments, and growth plans.

The firm has a separate UK sponsorless fund which reached a first close of more than £100 million in January.

One of the firm’s most recent deals was from the sponsorless fund, an £8.6 million loan to 4Most to support a reorganisation of shareholders and the business’ growth plan. 4Most provides regulatory and credit-risk analytics consultancy to banks, credit card providers, and other businesses with consumer credit exposure.

In total, Beechbrook has executed 36 transactions across the European lower mid-market and has fully exited 10 of those deals. — Rachel McGovern

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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.

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European CLO Issuance Hits 2.0-Era High of €2.56B

European CLO issuance

Those predicting a post-Brexit referendum surge of European CLO issuance appear to have called it right—at least over the near term—with July racking up the highest monthly issuance tally in the 2.0 era.

Following the vote there were some concerns that the market would halt as investors hugged the sidelines, given the uncertainty. But the relative calm and stability of the broader markets kept players active, enabling issuers prevented from accessing the primary ahead of the vote to price transactions.

All told, July’s supply reached €2.56 billion, well above the €1.82 billion notched up during March, the next-busiest month this year. The previous monthly volume record in the 2.0 era was June 2014, which hosted €2.49 billion of supply, according to LCD. – Sarah Husband/Andrew Park

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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.