Marlborough Partners, the independent private equity debt advisory firm, today published its report on the European leveraged finance market in Q3 2015.
The report, analysing data from a number of sources, shows leverage loan and high yield volumes down on Q2 2015 which was down in turn on volumes in Q1. This was predominantly due to an increase in market volatility which had a substantial impact on refinancing and repricing volumes.
In Europe, the total leveraged loan volume in Q3 was €10.4bn down from €15.9bn in Q2 2015. Of the decline, Marlborough believes a considerable portion was attributable to the reduction in refinancing activity.
Investor yield requirements increased substantially during the quarter which in the form of OID manifested itself through a peak average increase of c. 3 points in the US and c. 1.5 points in Europe. There was an increased bifurcation of the market during the quarter during which very strong BB rated credits showed little movement in pricing but at the other end of the scale, weak single B credits moved out substantially more than the average.
Marlborough Managing Partner, David Parker, said: “Market volatility is a time immemorial factor that both borrowers and investors need to deal with. Both sets of counterparties should monitor general market conditions with regularity and borrowers in particular should be wary of raising debt capital in choppy markets absent an absolute necessity”