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.
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.