Leveraged loans issuance sets new record

Unquote team
25 October 2021

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Leveraged loans backing buyouts set a new quarterly issuance record of EUR 19.6bn (excluding direct lending transactions) in Q3 2021, with issuance increasing 63% on a year-over-year basis, according to Debtwire Par data.

This was helped by jumbo deals for borrowers including Stockholm Exergi and Medline Industries, according to the Buyout Highlights: Market Overview & Financing Trends Q3 2021 report, which can be downloaded here.

High-yield bonds backing LBOs followed a different route, with volume decreasing 67% from the second quarter figure to EUR 1.2bn in Q3 2021 as more issuers turned to the loan market to finance buyouts. Q1-to-Q3 issuance of EUR 9.4bn is still 30% higher than the year-ago level, though.

Loan pricing continued to widen from historically tight Q1 2021 levels. First lien institutional loan pricing on LBOs moved up to an average margin of 403bps from just 375bps in the first quarter and an average OID (original issue discount) of 66bps, compared to 40bps. Pricing has stabilised from a spike in Q2 that pushed margins to an average of 436bps and average discounts hovered around 243bps.

High-yield bonds similarly moved up from historically tight pricing, ending Q3 at 4.85%, compared to 3.98% in the first quarter. Pricing ranged from 4.625% on Titan's (Crown Holding European tinplate business) eight-year unsecured paper to 5.125% on Itelyum's five-year secured note.

European private equity activity continued to break records with EUR 193.3bn in buyout value across 1,227 deals recorded during the first nine months of the year, the report stated. The figure already surpasses all annual values since the global financial crisis and comes close to the EUR 205.9bn collected in 2006, the most active year on Mergermarket record.