Marlborough Partners, the independent private equity debt advisory firm, today published its report on the European leveraged finance market in Q4 2015.
The report, analysing data from a number of sources including proprietary research, shows a weakening in performance across the large cap loan and bond markets during 2015 as a consequence of ongoing macro concerns in the 2nd half of the year. The large market saw bond issuance fall from €72bn to €64bn whilst loan market issuance decreased from €79bn to €64bn which combined translates to a decrease of 15%.
The decrease predominantly fell in the refinancing category as a result of yields moving out and therefore opportunistic refinancings and repricings fell away. Primary debt raising on the other hand was in line with that achieved in 2014, with the number of transactions increasing given a step up in the number of upper mid market issuers.
The UK mid- market was largely flat with 132 deals in the year (compared with 136 deals in 2014). This flat market masked a continued change in mix whereby bank volumes were down on prior year (on average by 1% based on the top 3 banks) versus an increase (from a much smaller base) in direct lending volumes (on average by 25% based on the top 3 direct lenders).
The continued pressure on mid-market bank asset books and competition from growth in direct lending has led to a number of banks forming loose or formal alliances with funds, moving up and down the size and credit spectrum as well as looking to selectively expand geographically.
Marlborough Managing Partner, David Parker, said: “Whilst macro concerns always have a significant impact on the large cap debt markets, the mid market continues to remain resilient largely due to the ever increasing size of dry powder from credit funds and the continued quest by bank lenders to maintain the size of their asset books”