March 2012, European leveraged loan market analysis

After a shaky start to the year, the market got its legs back to some extent. High yield bond markets appear to be opening up, and bond for loan takeouts are re-starting, thus enabling the “virtuous cycle.” Still, there is uncertainty due to turmoil in the sovereign markets.

Welcome to s p’s european loan market video overview detailing leverage finance transit activity during february 2012. i’m situated gupta a member of s p capital iq’s leveraged commentary and data team a unit of s p that is not affiliated with s p ratings for the next few minutes i’ll walk you through a review of recent loan and how you’ll bond market trends in

Europe before winding up for themes to watch for in march and early april 2012. before we start please know you can follow lcd on twitter facebook can join the more than 7 500 contacts in the lcd’s leveraged loan group on linkedin the links to follow lcd are in the info section on our youtube channel you can also download the slides for this video at

The market got its legs back somewhat in february after a shaky start of the year risk was back on the high yield market recorded its seventh week of inflows into high yield funds according to data from jpmorgan the secondary loan market finished the month up 50 bips at 95.64 high-yield bonds finished the month up 460 bips at 98.51 leveraged loan issues stood

At 2.8 billion euros for the month and high yield bond issuance had a read of 6 billion euros for february 2012 which is the highest read since april 2011. the s p european leveraged loan index the le had a positive return of 0.73 x currency for the month of february the primary markets opened up for both loans and bonds with the high yield bond market open a

Number of issuers that bond for loan takeouts the secondary markets recorded again again for the second consecutive month default rates however ticked up higher and are expected to go up higher later this year as well focusing on the secondary loan market this chart details the average price of lcd’s european loan flow name composite a measure of the 12 largest

Most liquid loans consisting of 10 issuers since 2002. loan investors were flush with cash and not that much paper available to them in the primary markets bid up loans in the secondary markets the flow names rose 50 bips to close the month at 95.64 this next chart details the average price of lcd’s european high yield flow name composite a measure of the 12

Most liquid high yield issues since the beginning of the year 2010. the high yield market gained 460 bips during the month to close the month at 98.6 the highest rate since july 2011. this next chart details the monthly return of the le a broad measure of european low market returns that lcd calculates all returns are x currency unless otherwise noted given the

Positive performance of loans in the secondary market it’s not surprising that the european loan market posted a positive return of 0.73 for february 2012. down from the 2.19 percent seen in january 2012. the total le return for the first two months this year is a positive three point three four percent versus four point one four percent seen for the same period in

Two thousand eleven now we turn from the secondary to the primary this graph details new issue volume for both leverage loans and high yield bonds the primary market was open for both high-yield bonds and leveraged loans in february 2012. with seven weeks of inflows into high-yield funds according to jpmorgan investors were looking for new primary deals to park

That cash high-yield bond issuance in february stood at 6 billion euros the highest read since april 2011. there were several large multi-transgender shores in february including warren switzerland schaffler and securitas there were also a few large bond for loan takeouts for issues such as ineos newmar kabul and central parks new issue leveraged loan volume for

February 2012 was 2 billion euros up from the 1.2 billion seen in january this includes new lbos such as all cell cpa global and or in switzerland though for or in switzerland the high yield demand was so strong that the institutional loan piece got pulled while for cpa global the loan demand was so strong that the deal got flexed with spreads being flexed down and

The oid being reduced the default rate by principal amount stands at 4.9 percent at the end of february up from the 4.1 percent seen at the end of december 2011. meanwhile the default rate by issuer count is up to 4.6 at the end of february up from the 3.4 seen at the end of december 2011. themes to watch for with the high yield bond market opening up and bond for

Loan takeouts starting again the virtuous cycle has started yet again with the markets opening up banks are willing to underwrite with the usual caveats though credit standards are being loosened as pressure builds on meeting budgets there’s still great uncertainty regarding turmoil in the sovereign markets though at this point in time it’s just a binary outcome

It’s whether greece defaults or not given the volatile and bleak macroeconomic conditions default rates however are expected to move up higher than what they already are during the course of this year that brings us to the end of our overview i hope you found it informative we’ll update the analysis each month and plan to have analysis of other specific european

Market segments going forward check out lcd’s youtube page for other video analysis of the leverage finance market including u.s loan market wrap-ups the link to the page is in the description for this video for more information on lcd news or research in europe you can contact anna cheney you can email her by clicking on the link in the info box thanks very much we’ll see you soon you

Transcribed from video
March 2012, European leveraged loan market analysis By LCDcomps