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Leveraged Finance Chart Book
Europe 4Q/2019
3 Summary
4 High Yield Heroics
5 Missing M&A
6 Room for Opportunists
7 Divergent Trends
8 CLO Expansion
9 All Charts
25 Contact Details
Contents
4Q19 Summary Bond Boost Lifts Primary Leveraged Finance Volume
New-issuance in Europe's leveraged finance market climbed to EU147b in 2019, a 6% increase on the previous year although still behind the post-crisis record set in 2017.
The high-yield market took the lion's share, with bonds outstripping loan issuance especially in the fourth quarter. By end-2019, bond sales amounted to EU79.8b, just over half of 2019's total debt raising, versus EU67.4b of loans sold to institutional investors.
The slower pace on the loan side was mainly due to fewer M&A transactions coming to market. Private equity sponsors pursued some large deals and made numerous bolt-on acquisitions, but dealflow still lagged 2018, held back by high valuations. M&A loan volume of EU37.1b was down 34% year on year.
Demand for high-yield was boosted by the ECB's renewal of its bond-buying program, and new-issue spreads fell, encouraging some borrowers to refinance loans with bonds in the late months of the year.
Loan spreads meanwhile did tighten through the second half of the year, and cautious investors saw to it that some single-B borrowers paid spreads of just 300-325bps and others well over 500bps.
Tighter pricing and a lack of M&A activity during the fourth quarter opened the way for borrowers to reprice and raise dividends in the loan market.
High Yield HeroicsBond sales reach EU79.8b at end-2019, loan volume lags at EU67.4b
A surge in activity during the fourth quarter saw Europe’s high-yield bond market surpass leveraged loan issuance for the full year.Bond financing was boosted by the ECB’s renewal of its bond-buying program, leading to tight spreads, while loan issuance wasslower especially given the lack of new LBOs in the latter part of the year.
EUR/GBP 1L/2L institutional loans (excludes repricings) and European HY corporate bonds.
Fourth-quarter 2019 bond volume far outstripped loans at EU28.5b versus EU10.6b, with bond issuance bolstered by loan-to-bond refinancings including Kiloutou and Berry Global.
EUR/GBP 1L/2L institutional loans (excludes repricings) and European HY corporate bonds.
European high-yield volume amounted to EU79.8b in 2019, up 28% on 2018. Institutional loan volume trailed 2019 by 12% at EU67.4b, the lowest since 2016.
4
0
20
40
60
80
100
120
140
160
180
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Total LevFin Issuance
Q1 Q2 Q3 Q4
0
5
10
15
20
25
30
35
Euro
Bill
ion
s
Total LevFin Issuance
LevLoans HY
Missing M&ATrailing acquisition financing depresses Europe’s primary loan activity
The year’s larger M&A deals included public to private buyouts and corporate divestments, but there were no super-sized buyouts as there were in 2018 and high valuation expectations among vendors continued to create hurdles for dealmaking. As a result, M&A financing was lower this year, weighing on overall volume.
M&A loan volume stood at EU37.1b at end-2019 in a 34% decline from the previous year after a particularly weak fourth quarter. Prospects for 1Q20 are much more promising however.
EUR/GBP 1L/2L institutional loans.
Private equity sponsors found targets in the public equity markets and bought assets from divesting conglomerates, but sponsor-to-sponsor M&A buyouts were scarce.
5
EUR/GBP 1L/2L institutional loans.
0
2
4
6
8
10
12
14
Euro
Bill
ion
s
Buyout Volume
Primary LBO Secondary LBO
0
5
10
15
20
25
30
Euro
Bill
ion
s
Use of Proceeds
M&A Other Purposes
Room for OpportunistsStrong demand for loans keeps the door open for refinancing, dividends
New CLO managers arriving in Europe and continued demand from existing managers, plus appetite from non-CLO funds, keptappetite for loans high throughout the year. That allowed existing borrowers to bolt on new money for dividends, and to reprice existingloans. Late in the year repricings picked up and more are expected in the 2020 unless heavy M&A issuance keeps the trend at bay.
4Q19 was the busiest quarter for repricings in two years, at EU7.7b. Borrowers also continued to refinance, helping to keep the maturity wall in Europe at a comfortable distance.
EUR/GBP 1L/2L institutional loans.
Seven borrowers tapped the loan market for debt-funded distributions to shareholders in the fourth quarter, making a total of 20 for the year, ahead of 2018.
6
EUR/GBP 1L/2L institutional loans.
-
10
20
30
40
50
60
Euro
Bill
ion
s
Use of Proceeds
New Money Refinancing Repricing
0
2
4
6
8
10
12
14
Dividend count
Count
Divergent TrendsWary investors cause pricing range to widen between easier and tougher credits
Lenders remained eager to book new loans but became increasingly cautious on cyclical or overlevered credits during the year,leading to a widening gap between the spreads on popular and difficult deals. From E+300 to well over E+500, the range reflectslenders getting better at pricing risk, and is a warning to arrangers to take care how they underwrite in the coming year.
Average single B EUR spreads shifted wider to 410bps in 4Q19, having been down at 402bps in 3Q19. But overall, spreads were tighter in the second half of the year and this allowed borrowers to reprice.
EUR 1L institutional loans. Double B issuers.
Spreads for double B issuers crunched down through the second half of the year. These issuers are scarce in Europe’s LBO-centric market and may become more so if 4Q19’s loan-to-bond refinancing trend continues.
7
EUR 1L institutional loans. Single B and unrated issuers.
300
350
400
450
500
550
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Single B All-in Spreads
3m AIS average
200
250
300
350
400
450
500
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Double B All-in Spreads
3m AIS average
CLO ExpansionNew managers helped drive the European CLO market to another record
At nearly EU30b, CLO issuance for 2019 in Europe was the highest since the crisis, building on the growth of the past four years. Eightnewcomers swelled the ranks of managers while existing managers worked to build their AUM. Despite the headline number, it was atough year for the arbitrage and loan supply fell short of managers’ hopes.
2019’s new-issue CLO activity amounted to EU29.8b from 72 deals by 50 managers, showing an increase over 2018. Analysts’ forecasts for 2020 are mostly for a thinner year.
Based on coupon.
CLO triple-A spreads edged wider in the final months of the year after tracking tighter over the summer, ending the year just inside the 100bps mark.
8
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019
Euro
Bill
ion
s
European CLO Issuance
Volume
0
50
100
150
200
250
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
European CLO Avg. AAA Coupon
Avg. AAA, Based on Coupon Wtd. Avg. Cost of Capital, Based on Coupon
All Charts
EUR/GBP 1L/2L institutional loans. Excludes repricings. Historical volumes revised to account for funged add-on tranches.
EUR/GBP 1L/2L institutional loans. Excludes repricings.
HY corporate bonds. HY corporate bonds.
0
20
40
60
80
100
120
0
5
10
15
20
25
30
Euro
Bill
ion
s
New Issue Loan Volume
Volume Count
0
10
20
30
40
50
60
70
80
90
2015 2016 2017 2018 2019
Euro
Bill
ion
s
New Issue Loan Volume
Q1 Q2 Q3 Q4
10
0
20
40
60
80
100
120
2015 2016 2017 2018 2019
Euro
Bill
ion
s
HY Volume
Q1 Q2 Q3 Q4
-
10
20
30
40
50
60
70
0
5
10
15
20
25
30
35
Euro
Bill
ion
s
HY Volume
Volume Count
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
-
10
20
30
40
50
60
2015 2016 2017 2018 2019
Euro
Bill
ion
s
M&A Issuance
Q1 Q2 Q3 Q4
0%
20%
40%
60%
80%
100%
M&A Share of Issuance
MA Other
051015202530354045
0
5
10
15
20
Euro
Bill
ion
s
M&A Issuance
Volume Count
11
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019
M&A Share of Issuance
MA Other
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
0
5
10
15
20
Euro
Bill
ion
s
Sponsored M&A Issuance
Sponsored Non-Sponsored
12
0
10
20
30
40
50
60
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Sponsored M&A Issuance
Sponsored Non-Sponsored
0
5
10
15
20
25
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Primary Buyout Volume
Q1 Q2 Q3 Q4
0
5
10
15
20
Euro
Bill
ion
s
M&A Issuance
LBO PE backed Corp
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
13
0
5
10
15
20
25
30
Euro
Bill
ion
s
Issuance by Currency
EUR GBP
0
10
20
30
40
50
60
70
80
90
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Issuance by Currency
EUR GBP
0
5
10
15
20
25
30
Euro
Bill
ion
s
Issuance by Rating
B BB CCC No Public Rating
0
10
20
30
40
50
60
70
80
90
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Issuance by Rating
B BB CCC No Public Rating
EUR/GBP 1L/2L institutional loans. EUR/GBP 1L/2L institutional loans.
EUR/GBP 1L/2L institutional loans. EUR/GBP 1L/2L institutional loans.
14
0
5
10
15
20
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Dividend Recapitalization Volume
Volume
0
20
40
60
80
100
120
140
160
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Use of Proceeds
New Money Refinancing Repricing
0
10
20
30
40
50
60
Euro
Bill
ion
s
Use of Proceeds
New Money Refinancing Repricing
0
2
4
6
8
10
12
14
16
0
1
2
3
4
5
6
7
Euro
Bill
ion
s
Dividend Recapitalization Volume
Volume Count
EUR/GBP 2L institutional loans. Excludes repricings. EUR/GBP 2L institutional loans. Excludes repricings.
EUR/GBP 1L institutional loans. Excludes repricings. EUR/GBP institutional loans. Excludes repricings.
0
2
4
6
8
10
12
0.0
0.5
1.0
1.5
2.0
Euro
Bill
ion
s
Second-Lien Volume
Volume Count
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Second-Lien Volume
Q1 Q2 Q3 Q4
3.9
4.4
4.9
5.4
5.9
6.4
6.9
7.4
Total Leverage
Leverage Multiple
3.8
4.0
4.2
4.4
4.6
4.8
5.0
Senior Secured Leverage
Leverage Multiple
15
EUR/GBP 1L/2L institutional loans. Excludes repricings. EUR/GBP 1L/2L institutional loans. Excludes repricings.
EUR 1L institutional loans. Excludes repricings. Average Time in Market calculated as time elapsed between Launch and Pricing.
EUR 1L institutional loans.
3.9
4.4
4.9
5.4
5.9
6.4
6.9
2015 2016 2017 2018 2019
Average Tenor
Tenor (Years)
0
5
10
15
20
25
30
35
40
Average Time in Market
Avg Time in Market (Days)
16
0%
20%
40%
60%
80%
100%
Covenant-Lite Issuance
Covenanted Covenant Lite
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019
Covenant-Lite Issuance
Covenanted Covenant Lite
EUR/GBP & USD 1L/2L institutional loans. Excludes repricings. EUR & USD 1L/2L institutional loans. Excludes repricings.
EUR/GBP 1L/2L institutional loans. Excludes repricings. USD-denominated 1L/2L institutional loans. Excludes repricings.
0
5
10
15
20
Euro
Bill
ion
s
Cross-Border Issuance
EMEA US
200250300350400450500550600650
Bas
is P
oin
ts
Cross-Border Pricing
EUR USD
0.00.51.01.52.02.53.03.54.04.5
Euro
Bill
ion
s
U.S. Borrowers in Europe
Volume
0
2
4
6
8
10
12
14
16
Euro
Bill
ion
s
European Borrowers in U.S.
Volume
17
EUR/GBP & USD 1L/2L institutional loans. Excludes repricings. EUR/GBP & USD 1L/2L institutional loans. Excludes repricings.
EUR/GBP & USD 1L/2L institutional loans. Excludes repricings. EUR/GBP & USD 1L/2L institutional loans. Excludes repricings.
020406080
100120140160180
Euro
Bill
ion
s
Global Institutional Issuance
EMEA US
0 10 20 30 40 50 60 70 80 90
Euro
Bill
ion
s
Global M&A Issuance
EMEA US
18
0
50
100
150
200
250
300
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Global M&A Issuance
EMEA US
0
100
200
300
400
500
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Global Institutional Issuance
EMEA US
EUR/GBP 1L/2L institutional loans(excludes repricings) and European HY corporate bonds.
EUR/GBP 1L/2L institutional loans(excludes repricings) and European HY corporate bonds.
FRN corporate bonds. FRN corporate bonds.
19
0
1
2
3
4
5
6
Euro
Bill
ion
s
FRN Volume
Volume
0
20
40
60
80
100
120
140
160
180
2015 2016 2017 2018 2019
Euro
Bill
ion
s
Total LevFin Issuance
LevLoans HY
0
2
4
6
8
10
12
14
16
2016 2017 2018 2019
Euro
Bill
ion
s
FRN Volume
Volume
0
10
20
30
40
50
60
Euro
Bill
ion
s
Total LevFin Issuance
LevLoans HY
EUR 1L institutional loans. EUR 1L institutional loans.
EUR 1L institutional loans. Single B and unrated issuers. EUR 1L institutional loans. Single B and unrated issuers.
0
100
200
300
400
500
600
700
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
All-in Spreads
3m Margin average 3m Floor average 3m OID average
300
350
400
450
500
550
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Single B All-in Spreads
3m AIS average
0
100
200
300
400
500
600
700
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Single B All-in Spreads
3m Margin average 3m Floor average 3m OID average
20
300
350
400
450
500
550
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
All-in Spreads
3m AIS average
EUR 1L institutional loans. Double B issuers. EUR 1L institutional loans. Double B issuers.
EUR 1L institutional loans. EUR 1L institutional loans. Single B and unrated issuers.
0
100
200
300
400
500
600
700
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Double B All-in Spreads
3m Margin average 3m Floor average 3m OID average
21
200
250
300
350
400
450
500
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Mar2018
Jun2018
Sep2018
Dec2018
Mar2019
Jun2019
Sep2019
Dec2019
Bas
is P
oin
ts
Double B All-in Spreads
3m AIS average
0%
20%
40%
60%
80%
100%
Distribution of Single B All-in Spreads
<350 351-400 401-450 451-500 >501
0%
20%
40%
60%
80%
100%
Distribution of All-in Spreads
<350 351-400 401-450 451-500 >501
EUR 1L institutional loans. EUR 1L institutional loans.
EUR/GBP/USD 1L institutional loans. EUR/GBP 1L/2L institutional loans.
97
97.5
98
98.5
99
99.5
100
100.5
Per
cen
t
Issue Price
Average New Issue Price
300
350
400
450
500
550
600
650
Bas
is P
oin
ts
All-in Spread by Currency
EUR USD
22
93
94
95
96
97
98
99
100
101
12/1/2017 6/9/2018 12/16/2018 6/24/2019 12/31/2019
Distribution of Issue Price
-20
-10
0
10
20
30
40
50
Facilities Flexed Wider/Tighter
Flexed Tighter Flexed Wider
Includes deals that had no single B tranche; the average is higher if these deals are excluded (201bps for March).
0
20
40
60
80
100
120
140
Bas
is P
oin
ts
European CLO Avg. AAA Coupon
Avg. AAA, Based on Coupon
0
5
10
15
20
0123456789
Euro
Bill
ion
s
European CLO Issuance
Volume Count
0
5
10
15
20
25
30
35
2015 2016 2017 2018 2019
Euro
Bill
ion
s
European CLO Issuance
Q1 Q2 Q3 Q4
Based on coupon.
23
0
50
100
150
200
250
Bas
is P
oin
ts
European CLO WACC
Wtd. Avg. Cost of Capital, Based on Coupon
0
50
100
150
200
250
Euro
Bill
ion
s
Loans Outstanding
Amount Outstanding
24
0
5
10
15
20
Euro
Bill
ion
s
CLO & New Money Issuance
CLO Loans
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Per
cen
t
Bloomberg Barclays Pan-European HY Index
Yield to Worst
290
300
310
320
330
340
350
Bloomberg Barclays Pan-European HY Index
Last Price
New loan issuance, excluding repricings/refinancings.
Contact Details
Gianluca [email protected] Data – Syndicated Loans
Ruth [email protected] News – Leverage Finance Strategist
Mark Phillips*[email protected] Market Specialists – Credit, Loans and ABS/CLO
*Please contact if you would like to arrange a demonstration of Bloomberg functionality for leveraged finance
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