Issuance in the primary hit a post credit-crunch high in May, while secondary markets were down. CLO issuance was promising, with more in the pipeline, although new EBA directives threaten to hinder issuance going forward. More spread/yield compression is expected going forward, as issuers play loan and bond investors against each other in search of best terms.
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2. European Market Trends
Text
• The S&P European Leveraged Loan Index (ELLI) finished the month up 0.11%.
• Loan issuance was €8.7B in May 2013, while HY issuance was €9.0B.
• Secondary markets were down:
loan markets were down 17 bps to finish the month at 100.41;
high yield markets were down 139 bps to finish the month at 103.24.
• Estimated inflows into European HY funds was €975M for May, versus €555M for April.
YTD inflows are almost €4B.
• Default rates stayed roughly the same.
3. 91
93
94
96
98
99
101
3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13 5/13
.
European Loan Flow Name Prices
Text
Source: LCD - Leveraged Commentary & Data
5. 0%
0.4%
0.8%
1.1%
1.5%
4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13
.
ELLI Multi-Currency Loan Return
Text
May 2013: + 0.11%
April 2013: + 0.88%
Jan-May 2013: + 3.19%
Jan-May 2012: + 4.63%
Source: S&P European Leveraged Loan Index
6. .
0
5
9
14
18
4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13
Volume: New-Issue Loans vs. HY Bonds
HY bonds
Loans
€billions
Text
Source: LCD - Leveraged Commentary & Data
€9B
€8.7B
7. 0%
3%
6%
10%
13%
16%
2/09 2/10 12/11 2/12 5/13
0%
3%
6%
10%
13%
16%
2/09 2/10 2/11 12/11 5/13
.
ELLI Default Rates – European Leveraged Loans
Default Rate by Principal Amount Default Rate by Issuer Count
Text
Source: LCD - Leveraged Commentary & Data
8. Themes To Watch For
Text
• Given the buoyant equity markets, expect further IPOs from some sponsor-led companies, allowing them to
return cash back to their LPs.
• YTD CLO issuance at €1.34B, with still a few more managers and vehicles on the forward pipeline.
However, new directives from the EBA could hinder new CLO issuance.
• Further spread / yield compression is expected, as issuers use capital markets to essentially play loan
investors against bond investors to get the best terms possible.
• Global co-mingled funds being launched, combining loans and high yield bonds, with a focus on both US and
Europe.
9. pause
Text
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