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:

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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