Buyout loan issuance down 38% YoY, says Baird study

Although loan issuance volumes have slumped, the report highlights a clear "flight-to-quality" phenomenon: the average debt/EBITDA ratio stands at 4.6x in 2012 (including 4.2x for senior debt) compared to 4.5x last year, while the average purchase price multiple rose to 9.6x EBITDA from 8.7x last year.

The rise in debt multiples is mostly noticeable for larger deals (>€500m) with a 5.6x average, compared to 4.9x in 2011 – largely due to the growing importance of the subordinated element (more than 1.5x in 2012). In the mid-market, Baird suggests that senior debt up to 4x EBITDA is available for strong credits, while 3-3.5x is more typical for sub-€100m deals.

Lenders remain cautious, though: equity cushions are larger on average at 55%, up from around 50% last year.

Pricing-wise, the report reveals that average margins on senior A and B loans for new deals stand at 500 bps and 550 bps respectively. In the UK, 575-600 bps is also being witnessed for senior B loans.

Q3 also saw a strong uptick in the high-yield market, with European issuance standing at close to €11bn compared to less than €5bn in Q2. Nearly three quarters of the issuance were targeted at refinancings and corporate purposes though, with less than a fifth financing acquisitions.

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• Topics
• Financing
• Robert W. Baird