Marlborough Partners, the independent private equity debt advisory firm, today published its report on the European leveraged finance market in Q1 2015.
The report, analysing data from a number of sources, shows leverage loan and high yield issuance up strongly on Q4 2014 and the comparable period in Q1 last year. This was partly due to increased M&A activity and to a small number of significant issuances such as Merlin (€1.3bn) and Trader Media (€0.8bn). It also reflects a number of deals that signed in Q4 2014 but closed in Q1 2015.
In Europe, the total leveraged loan volume in Q1 was €20.4bn (of which, €13.0bn was M&A related) , up from €13.2bn in Q4 2014. This represents the strongest first quarter since 2007. In the UK the total was €6.8bn, a 68% increase on Q4 2014 and 4.3x the level experienced in the same period in 2014.
Q1 2015 had lower volumes in terms of opportunistic deals such as dividend recaps and repricings. Sponsored dividend recap volumes across Europe fell from €2.7bn in Q4 2014 to €0.7bn, representing 31% of total sponsored loan volume in Q4 2014, but only 5% in the last quarter. Repricings amounted to €1.4bn last quarter, a 4% decline against Q4 2014, however, compared to the same period last year, volumes are down by 59%.
Cov-lite volumes amounted to €5.1bn in Q1 2015, representing 40% of total institutional loan volume, up from 33% in Q4 2014 and 29% in the same period last year. The bulk of Q1 cov-lite issuance (€4.0bn (or 80%) of) was related to cross-border financings.
iTraxx fluctuated between 249bps and 366bps in the quarter and settled at 262bps, 83bps lower than the level reached at the end of Q4 2014. High yield volumes of €27.1bn in Q1 2015 represent the largest Q1 volume on record, driven in part by the ECB’s announcement of quantitative easing.
Marlborough Managing Partner, Jonathan Guise, said: “It is hard to remember a time when the market has been so attractive to mid-market borrowers. Excess liquidity has resulted in intense competition between bank and non-bank lenders, resulting in tight pricing, more flexible structures and looser covenants. The larger, underwritten loan market, however, has been less consistent with bigger, more liquid names being more favorably received by investors, particularly those issuing in Euros. The smaller end of the underwritten loan market (sub €300m of debt) proved to be particularly tricky with 6 out of 7 Q1 deals being flexed up.”