FRONT STORY EUROPEAN MARKETS
Lending steady despite macro fears
First half loan volume in EMEA hits US$478bn, down 4% y-o-y
Leveraged loan volume of US$111.94bn slumps 21.2% as refi activity falls
First half syndicated lending in Europe, the
Middle East and Africa of US$478bn was
DOWNûûCOMPAREDûWITHûTHEûlRSTûSIXûMONTHSû
of 2017, as borrowing remained steady in
the face of global economic and political
uncertainties.
Wider factors including a more
protectionist US, painfully slow progress
OVERû"REXIT ûANDûTHEûIMPENDINGûENDûOFûTHEû
European Central Bank’s quantitative easing
programme has not dented borrower
appetite. Meanwhile banks remain
underlent and eager to do deals.
h)TSûBEENûAûRELATIVELYûHEALTHYûlRSTûHALF û
volumes are okay. There is pressure on the
banks – if you were involved in the three or
four big deals out there then you were
relatively busy, but if you missed out on
them all you were worryingly quiet,” a
senior banker said.
2ElNANCING ûTHEûMAINûDRIVERûOFûACTIVITYûINû
%-%! ûHADûVOLUMEûOFû53BNûINûTHEûlRSTû
half, making up almost 70% of loan volume.
This was 5% higher than a year earlier as
companies continue to take advantage of
high levels of market liquidity and
CONTINUINGûLOWûINTERESTûRATESûTOûRElNANCEûORû
AMENDûANDûEXTENDûEXISTINGûLOANS
4HEûLARGESTûRElNANCINGûOFûTHEûSECONDû
quarter was Italian insurance provider
GENERALI, which signed a €4bn loan in May,
incorporating sustainable and Green
features.
Also in May, South African
pharmaceuticals company ASPEN closed
€3.4bn-equivalent of loans, replacing an
EXISTINGûõBN
EQUIVALENTûLOANûORIGINALLYû
agreed in June 2016, while French carmaker
PEUGEOTûAMENDEDûANDûEXTENDEDûAûõBNû
syndicated credit on improved terms.
-!ûlNANCINGûINûTHEûlRSTûHALFûREMAINEDû
stable and in line with last year, just
US$2.5bn down at US$150bn. However, a
relative absence of big cross-border
acquisitions coming out of Europe hit
volume.
Second quarter M&A volume was
dominated by ACS majority-owned German
builder HOCHTIEFSõBNûLOANûlNANCINGû
backing its joint takeover, with Italian
transport infrastructure company ATLANTIA,
of Spanish toll-road operator ABERTIS that
completed in April.
UK industrial turnaround specialist
MELROSE closed a £4.5bn-equivalent loan in
April to back its £8.1bn takeover of
ENGINEERINGûlRMû'+.
Meanwhile, German utility E.ON
completed a €5bn loan in June to back its
takeover of a stake in energy group Innogy.
4HEûINCREASEûINûRElNANCINGûANDûSTABLEû
M&A volumes saw lending to Europe’s high-
grade companies increase 9% at the half year
point to US$298bn.Lending to borrowers in Central and
Eastern Europe, Middle East and Africa
TOTALLEDû53BNûINûTHEûlRSTûHALF ûUPû
from US$63.24bn in the same period last
year. However, in the Middle East,
borrowing activity was very subdued in the
second quarter and loan volume reached
just US$4.4bn - its lowest three-month total
since the second quarter of 2004.LEVERAGED DIP
Leveraged loan volume of US$111.94bn for
THEûlRSTûHALFûOFûûISûDOWNûûONûTHEû
SAMEûPERIODûLASTûYEARûASûRElNANCINGûACTIVITYû
dropped notably from the bumper levels
seen a year ago.
.ON
,"/ûRELATEDûISSUANCEûFELLûTOû
53BNûFORûTHEûlRSTûHALFûOFûTHEûYEAR û
almost a third lower than the US$123.07bn
INûTHEûlRSTûHALFûOFûû4HISûINCLUDESûALLû
RElNANCING ûRECAPûANDûLEVERAGEDûCORPORATEû
related issuance.
However, leveraged buyout related
issuance has increased to US$25.93bn in the
lRSTûSIXûMONTHSûFROMû53BNûINûTHEû
same period of 2017.
“It’s been very busy in both the sponsor
ANDûTHEûCORPORATEûSPACE vûSAIDû.ICKû
!TKINSON ûHEADûOFûLEVERAGEDûlNANCEû%-%!ûat MUFG. “The biggest change this year has
BEENûTHEûmIPûFROMûRElNANCINGûTOûNEWûDEALSû
Pricing has widened a little in the last
month or so but I don’t see that liquidity
going away.”
7HILEûTHEûHEADLINEûISSUANCEûlGUREûISû
down this year, it is largely attributable to
THEûDROPûOFFûINûRElNANCINGûACTIVITYûFROMûLASTû
YEARûTHEû53BNûOFûRElNANCINGûDONEûINû
THEûlRSTûHALFûOFûûWASûTHEûLARGESTûSINCEû
2007.
“With QE drawing to a close, pricing has
started to rise,” said Jeff Bennett, head of
leveraged corporate origination EMEA at
MUFG. “As the market’s been at all-time
lows for a long time, it is more a case of
returning to more ‘normal’ levels.”
Dividend recapitalisations have also dried
UPûTHISûYEARû/NLYûSOMEû53MûWASûISSUEDû
INûTHEûlRSTûHALFûOFûTHEûYEAR ûDOWNûûFROMû
THEû53BNûISSUEDûDURINGûTHEûlRSTûHALFûOFû
2017.
“Dividend recaps have become trickier,”
SAIDûAûGLOBALûCO
HEADûOFûLEVERAGEDûlNANCEûATû
AûBANKûINû,ONDONûh7EREûDElNITELYûPASTûTHEû
peak of the debt market.”
There have been several large-scale
leveraged buyouts. The Macquarie-led take-
private of Danish telecoms group TDC was
backed by a €3.9bn-equivalent buyout Term
Loan B package. The €2.7bn portion was the
largest single tranche Term Loan B to hit the
European market since the crisis.
Selldown of the jumbo US$13.5bn loan
ANDûBONDûlNANCINGûBACKINGûBLACKSTONE
GROUP’s US$20bn acquisition of a 55% stake
in THOMSON REUTERS’ Financial and Risk unit is
under way.
A US$8bn-equivalent Term Loan B is being
shown to large institutional investors before
ANûEXPECTEDû3EPTEMBERûLAUNCH ûANDûAû
US$5.5bn bridge loan to high-yield bond
issues was also launched at the end of June.
Blackstone is buying a 55% stake in F&R,
which includes IFR.
The deal pipeline is looking strong, as
Carlyle’s €10bn carve-out of AKZO NOBEL’s
chemicals division still to come to the
market. Banks have lined up as much as
€7.3bn-equivalent of debt to back the buyout.
Alasdair Reilly, Max BowerThe biggest change this
year has been the flip from
refinancing to new deals.
Pricing has widened a little in
the last month or so but I don’t
see that liquidity going away”LOANS
Australia 56 China 56 Hong Kong 57 Indonesia 57 Japan 58 Czech Republic 58 Germany 60 Netherlands 60
Russia 61 Switzerland 62 Turkey 62 UK 62 United States 63 Mexico 65 Leveraged Loans 65 Restructuring 68