Refinancings drive activity in loan market

According to Marlborough Partner's latest mid-market snapshot report, European leveraged loan volumes have increased significantly, with €23.5bn issued in the second quarter of this year, up by 47% from last quarter's €16bn. With refinancings taking the lion's share in loan volumes in the first half of 2013 (63%), M&A activity made up just 32%, marking an all time low, while dividend recapitalisations accounted for 5% of the total.

The figures reveal private equity firms are focused on refinancing portfolio companies after it was widely feared that a refinancing wall – set to hit in 2014 – would create a credit bubble in the UK.

In the UK alone, overall loan values rocketed to €4.7bn in Q2 from just €2.7bn in the previous quarter. Year-to-date total loan values in the UK private equity market reached €7.4bn by the end of June 2012, compared with €4.3bn over the same period last year.

The call to slow down quantitative easing in the US spooked the markets and saw pricing expectations widen to more than 500bps but fortunately this slipped back down to the 430bps level by the end of the quarter. Indications that the Fed will taper its quantitative easing programme saw high-yield bond total values drop to €18.3bn, down by 14% on the first quarter. However, it should be pointed out that Q2 was the second highest quarter on record for high-yield values, and as seen in the loan market, this was driven predominantly by portfolio company refinancings, which accounted for 53% of total issuance.

Beyond loans and high-yield bonds, unitranche lending is continuing to gain traction in the UK with several deals currently in process, according to the report.

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• Topics
• Financing
• Marlborough Partners
• high yield