The high yield bond market took control in March, while the market readied for actual CLO issuance.
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European leveraged loan market analysis - April 2013
1. out
Text
European Leveraged Finance Market Update
April, 2013
Sucheet Gupte - Director
open pause
Text
2. European Market Trends
Text
• Loan issuance was €4.85B in March 2013; HY issuance was €8.6B.
• Estimated inflows into European HY funds was €614M for
March compared to an outflow of €154M in February and an
inflow of €1.8B in January.
• Secondary markets are mixed:
loan markets up almost 40 bps points to finish the month at 99.86;
high yield markets down 26 bps to finish the month at 102.57.
• The S&P European Leveraged Loan Index (ELLI) finished March up 0.91%.
• Default rates were mixed:
default rates by principal amount fell;
default rate by issuer count stayed level.
3. European Loan Flow Name Prices
100
99
Text
97
96
94
93
91
1/11 3/11 5/11 7/11 9/11 11/17 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13
. Source: LCD - Leveraged Commentary & Data
4. European HY Bond Flow Name Prices
106
102
Text
98
94
89
85
81
1/11 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
. Source: Bloomberg
5. ELLI Multi-Currency Loan Return
2.5%
March 2013: + 0.91%
Text February 2013: + 0.40%
Q1 2013: + 2.52%
Q1 2012: + 4.36%
1.9%
1.3%
0.6%
0%
12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13
. Source: S&P European Leveraged Loan Index
6. Volume: New-issue Loans vs. HY Bonds
15
HY bonds
Text Loans
11
€billions
8
4
0
11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13
. Source: LCD - Leveraged Commentary & Data
7. ELLI Default Rates – European Leveraged Loans
Default Rate by Principal Amount Default Rate by Issuer Count
16% 16%
13% 13%
10% 10%
6% Text
6%
3% 3%
0% 0%
2/09 2/10 2/11 12/11 3/13 2/09 2/10 12/11 2/12 3/13
. Source: LCD - Leveraged Commentary & Data
8. Themes to watch for
Text
• Further spread / yield compression is expected, as loan issuers use access to
the high yield markets to reduce existing spreads.
• Along with repricings, some sponsors are tabling dividend recap deals to take
advantage of investor demand, both in loans and high yield.
• Still strong demand for HY bonds, so far this year, net inflows stand at €2.26B.
• Bond for loan-take-outs will continue to keep pace as issuers address their
maturity concerns.
• Both Apollo and Pramerica are expected to price their CLOs sometime in
April and there are whispers that others might look at doing the same.
• Still fear that geo political shocks could erode confidence from the markets.
10. Text
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