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European Leveraged Finance Market Update
September, 2013
Sucheet Gupte - Director
Text
European Market Trends
Text
• Secondary markets were up:
Leveraged loan markets were up 81 bps to finish the month at 99.83;
HY markets were up 253 bps to finish the month at 102.45.
• The European leveraged finance primary and secondary markets enjoyed a summer of confidence.
• Estimated inflows into HY funds were almost €1.6B for July & August versus outflows of €2.4B
in June. Net inflows till the end of August are an estimated €1.3B.
• Loan issuance was €10.4B in July & August 2013, while HY issuance was just €8.2B.
• Default rates were markedly lower.
• The ELLI was up both for July and August, with August returns at the highest read so far this year.
• 3 new CLOs priced in early August from 3i, Haymarket, and GSO/Blackstone.This adds to July’s
tally of 3 from Ares, CSAM, and ICG -- brings theYTD tally to €4.13B.
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 10/12 12/12 2/13 4/13 6/13
.
European Loan Flow Name Prices
Text
Source: LCD - Leveraged Commentary & Data
8/13
.
81
85
89
94
98
102
106
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 6/13 8/13
European HY Bond Flow Name Prices
Source: Bloomberg
Text
5/13
-0.4%
0.1%
0.6%
1.0%
1.5%
8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13
.
ELLI Multi-Currency Loan Return
Text
August 2013: + 1.45%
July 2013: + 0.39%
Jan-Aug 2013: + 4.70%
Jan-Aug 2012: + 6.34%
Source: S&P European Leveraged Loan Index
.
0
5
9
14
18
7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13
Volume: New-Issue Loans vs. HY Bonds
HY bonds
Loans
€billions
Text
Source: LCD - Leveraged Commentary & Data
€0.3B
€0.6B
0%
3%
6%
10%
13%
16%
2/09 2/10 12/11 2/12 8/13
0%
3%
6%
10%
13%
16%
2/09 2/10 2/11 12/11 8/13
.
ELLI Default Rates – European Leveraged Loans
Default Rate by Principal Amount Default Rate by Issuer Count
Text
Source: LCD - Leveraged Commentary & Data
Themes To Watch For
Text
• Beyond a certain size / quantum of debt, issuers have to look towards the US
market for liquidity and best execution, be that either through loans or bonds.
• There is a strong forward calendar for both loans and bonds, as issuers try to lock
in favorable rates and terms.
• CLO calendar is still strong, though it doesn’t and won’t make up for the
shortfall from what will disappear from the market when a number of CLOs
go past their reinvestment period.
• Risk is back on, as seen by lower default rates and better manufacturing data, however
any exogenous event can set things back again.
pause
Text
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investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor.While S&P
has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any
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Text

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September 2013, European Leveraged Loan Market Analysis

  • 1. European Leveraged Finance Market Update September, 2013 Sucheet Gupte - Director Text
  • 2. European Market Trends Text • Secondary markets were up: Leveraged loan markets were up 81 bps to finish the month at 99.83; HY markets were up 253 bps to finish the month at 102.45. • The European leveraged finance primary and secondary markets enjoyed a summer of confidence. • Estimated inflows into HY funds were almost €1.6B for July & August versus outflows of €2.4B in June. Net inflows till the end of August are an estimated €1.3B. • Loan issuance was €10.4B in July & August 2013, while HY issuance was just €8.2B. • Default rates were markedly lower. • The ELLI was up both for July and August, with August returns at the highest read so far this year. • 3 new CLOs priced in early August from 3i, Haymarket, and GSO/Blackstone.This adds to July’s tally of 3 from Ares, CSAM, and ICG -- brings theYTD tally to €4.13B.
  • 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 10/12 12/12 2/13 4/13 6/13 . European Loan Flow Name Prices Text Source: LCD - Leveraged Commentary & Data 8/13
  • 4. . 81 85 89 94 98 102 106 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 6/13 8/13 European HY Bond Flow Name Prices Source: Bloomberg Text 5/13
  • 5. -0.4% 0.1% 0.6% 1.0% 1.5% 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 . ELLI Multi-Currency Loan Return Text August 2013: + 1.45% July 2013: + 0.39% Jan-Aug 2013: + 4.70% Jan-Aug 2012: + 6.34% Source: S&P European Leveraged Loan Index
  • 6. . 0 5 9 14 18 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 Volume: New-Issue Loans vs. HY Bonds HY bonds Loans €billions Text Source: LCD - Leveraged Commentary & Data €0.3B €0.6B
  • 7. 0% 3% 6% 10% 13% 16% 2/09 2/10 12/11 2/12 8/13 0% 3% 6% 10% 13% 16% 2/09 2/10 2/11 12/11 8/13 . 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 • Beyond a certain size / quantum of debt, issuers have to look towards the US market for liquidity and best execution, be that either through loans or bonds. • There is a strong forward calendar for both loans and bonds, as issuers try to lock in favorable rates and terms. • CLO calendar is still strong, though it doesn’t and won’t make up for the shortfall from what will disappear from the market when a number of CLOs go past their reinvestment period. • Risk is back on, as seen by lower default rates and better manufacturing data, however any exogenous event can set things back again.
  • 9. pause Text Copyright 2013 Standard & Poor's, a division of The McGraw-Hill Companies, Inc. No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P.The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user.The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS,THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format.The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor.While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Text