European Leveraged Market Update

Transcription

1 European Leveraged Market Update 16 July 2013 Syndicate Torsten Aul Frankfurt European Leveraged Finance Nicolaus Loos Frankfurt Marco Samii Frankfurt Daniele Candiani Milano Xavier Weisrock Paris Contact / Information IKB Deutsche Industriebank AG Wilhelm-Bötzkes-Str Düsseldorf More publications, online information and events via: Capital Markets & Derivatives Tilo Kraus Düsseldorf Tilo.Kraus@ikb.de Institutional Sales Tobias Bodamer Düsseldorf Tobias.Bodamer@ikb.de

2 IKB Market Outlook 1 Ifo Business Climate Index Forecasts July 13 in 3M in 6M in 9M in 12M Money Market 3M-Euribor ECB Refi. Rate BoE base rate M-$-Libor Fed fund rate Y-Bund Y-Treasury FX EUR/USD EUR/CHF EUR/GBP European Economic Outlook As widely expected, the ECB left their main policy rates unchanged. New was the fact that the ECB attempted to influence expectations by giving explicit forward guidance regarding the path of future interest rates. In that regard, ECB President Draghi announced that the key lending rate will remain at the present or lower levels for an extended period of time. He also confirmed the three key indicators that will determine the future path of monetary policy: the mid-term outlook for inflation, economic activity and dynamics in monetary aggregates. Draghi pointed to the improvement in the funding situation of banks and the strengthening in the domestic deposit base in a number of Euro countries. However, he stressed that the OMT-Program was technically ready to be activated to address any possible tail risks in the Euro area. The Eurozone manufacturing PMI rose to a 16-month high of 48.8 in June, up from 48.3 a month earlier. The readings for Spain and Italy hit a 26-month and 23-month high respectively, signalling that the downturn in the manufacturing sector eased noteworthy in the month of June. The German ifo-index climbed to in June from in May, mainly due to positive expectations regarding export growth F 2014F 2015F Real GDP EU 1.6% -0.5% -0,4% 1.2% 1.7% Germany 3.1% 0.9% 0.6% 2.2% 2.0% UK 1.0% 0.3% 0.8% 1.4% 2.1% ES 0.4% -1.4% -1.6% 0.5% 1.5% USA 1.8% 2.2% 1.8% 2.7% 2.9% Inflation EU 2.7% 2.5% 1.5% 1.5% 1.8% Germany 2.1% 2.0% 1.6% 1.8% 1.9% UK 4.5% 2.8% 2.8% 2.5% 2.2% ES 3.1% 2.4% 1.5% 1.1% 1.9% USA 3.1% 2.1% 1.6% 2.0% 2.3% Source: Bloomberg; ifo-institut; IKB (12/07/13)

3 Price [%] Volume [ b] Number Leveraged Loan Market 2 Leveraged Loan Market Comment July 2013 The European leveraged loan market reached in 1H2013 a loan volume of 39.6b, which is more than double the 15.2b tracked at this time in This was mainly supported by a strong second quarter, where roughly 23.5b were raised by European borrowers up 47% from the first three months proving the asset class resilience during the recent market volatility (June: 7.62b). Sponsored borrowers raised 4b in the loan market in June, which is the second highest tally so far in The year to date volume, the highest in five years, was at 21.5b through June 30. Also the supply flow (sponsor driven) showed little signs of abating with at least 3b of new loans planned to launch through mid July. In the first half of 2013 around 63% of leveraged loan volume was used for refinancing, while M&A activity accounted for just 32%, an all time low. Recapitalizations accounted for 5% of volume, down 8% from last year. The average institutional spread stood at E+406 in the second quarter, a touch above E+402 seen in May, which was the lowest level since March The previous months saw a number of reverse flexes, but recently few European deals started to flex margins up (e.g. Armacell, Webhelp, Formula One). Key leverage deals currently being marketed include names like Springer ($2,475m), United Biscuits ( 725m), Pret a Manger ( 375m) and Eden Springs ( 225m). The current auction pipeline includes names like AHT, Host Europe, Nocibe and Domestic & General. Selected Recent Leveraged Loan Issues Senior Loan Volume & Deal Count for LBOs Leveraged Loan Flow Names: Avg. Bid vs. Avg. Ask Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Avg. Bid Volume Deal Count Avg. Ask Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun Sources: Bloomberg, S&P s LCD, IKB (12/07/13)

4 Spread [bps] Volume [ b] Yield [%] High-Yield Market 3 High-yield Market Comment July 2013 The European high yield primary market is experiencing its first protracted period of turbulence this year with an abating pace of issuances. The instability is caused by the market concerns that the Fed will soon turn off the quantitative easing taps, which in turn has lifted government bond yields around the globe, triggering a fall in prices of most asset classes. June with just 2.9b issuance was the weakest month in 2013 so far. Despite the June slowdown, year to date volume totaled 39.7b, exceeding all full year totals except for 2010, at 44.4b. A total of 927m has flowed out of the market over the past three weeks (according to J.P.Morgan) and this includes the largest one week outflow since August However, signs of market stabilization have been supported by the issuance of new deals, such as Continental ( 625m), Vue Entertainment ( 590m) or FTE Automotive ( 240m). Other high yield deals in the pipeline includes Maison du Monde or CeramTec. Refinancing accounted for 53% of overall volume. Bond for loan takeouts have increased to unprecedented levels, with 9.8b of bonds intended to take out bank debt so far in 2013, which is the highest reading for any comparable time period. The average primary yields stood at 6.66% in the three months through June 30. For the second quarter B rated bonds were yielding 7.39% (Q %) and BB rated bonds carried a record low average yield of 4.49% (Q %). The Itraxx Crossover closed on July 11 th at bps, approx. 61bps wider from its recent 108-week-low of 366.2bps as per 22nd of May HY Volume & Primary Yield itraxx Crossover 5y % 010% Non-LBO Volume LBO Volume 008% 008% 008% 008% 008% 10% 008% 007% 007% 007% 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 5% 0% 426.8bps Selected Recent High-Yield Issues Sources: Bloomberg, S&P s LCD, IKB (12/07/13)

5 Corporate Loans Capital Market & Advisory Leveraged Finance IKB s Recent Lead Financing and Capital Market Transactions Selected IKB-Transactions

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7 6 Contact at: IKB Deutsche Industriebank AG Wilhelm-Bötzkes Str Düsseldorf Tel.: IKB Deutsche Industriebank AG Eschersheimer Landstr Frankfurt Tel.: Syndicate Desk Tel.: July 16, 2013 Published by: IKB Deutsche Industriebank AG, Wilhelm-Bötzkes-Straße 1, Düsseldorf Public limited company under German law Registered office: Düsseldorf, Germany Registered at the Düsseldorf District Court, Commercial Register no. HR B 1130 Chairman of the Supervisory Board: Bruno Scherrer Chairman of the Board of Managing Directors: Hans Jörg Schüttler Members of the Board of Managing Directors: Dr. Dieter Glüder, Claus Momburg, Dr. Michael H. Wiedmann