Q3 2016 Market Update

Marlborough Partners, the independent debt advisory firm, today published its report on the European leveraged finance market for Q3 2016.

The report, analysing data from a number of sources, shows European leveraged loan volumes significantly higher for the quarter compared to prior year (73%). This was primarily due to a notable increase in opportunistic refinancing and recapitalisation activity following a decrease in yields over the quarter. The European high yield market also grew in tandem with its loan market counterpart, with Q3’16 volumes up 81% on the prior year.

In the UK, institutional spreads for senior loans witnessed a significant reduction over the quarter, tightening by 62 basis points compared with last quarter to average 488 basis points. This followed central bank monetary easing in response to the ‘Brexit’ vote, as well as a reflection of pent up investor demand.

The report also reflected on the increasing interest of fund level financing by private equity funds, as an additional source of third party capital to enhance equity returns or accelerate distributions to LPs, as well as provide an alternative capital source when traditional leveraged debt at a portfolio level is no longer an option.

Marlborough Partner, Gurjit Bedi, said: “The number of enquires made by sponsors has increased dramatically over the last 12 months for fund level financings particularly in the mid-market across Europe.  Whilst there are a number of interesting alternative products the purpose of implementing the facility may well be very different, the nature of the instruments is still bespoke and requires a tailored approach to structuring and implementation for each sponsor”.

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