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September 2013, European Leveraged Loan Market Analysis

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Page 1: September 2013, European Leveraged Loan Market Analysis

European Leveraged Finance Market UpdateSeptember, 2013

Sucheet Gupte - Director

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Page 2: September 2013, European Leveraged Loan Market Analysis

European Market TrendsText

• Secondary markets were up: Leveraged loan markets were up 81 bps to finish the month at 99.83; HY markets were up 253 bps to finish the month at 102.45.

• The European leveraged finance primary and secondary markets enjoyed a summer of confidence.

• Estimated inflows into HY funds were almost €1.6B for July & August versus outflows of €2.4B in June. Net inflows till the end of August are an estimated €1.3B.

• Loan issuance was €10.4B in July & August 2013, while HY issuance was just €8.2B.

• Default rates were markedly lower.

• The ELLI was up both for July and August, with August returns at the highest read so far this year.

• 3 new CLOs priced in early August from 3i, Haymarket, and GSO/Blackstone. This adds to July’s tally of 3 from Ares, CSAM, and ICG -- brings the YTD tally to €4.13B.

Page 3: September 2013, European Leveraged Loan Market Analysis

91

93

94

96

98

99

101

3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 10/12 12/12 2/13 4/13 6/13

.

European Loan Flow Name Prices

Text

Source: LCD - Leveraged Commentary & Data

8/13

Page 4: September 2013, European Leveraged Loan Market Analysis

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81

85

89

94

98

102

106

3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 3/13 6/13 8/13

European HY Bond Flow Name Prices

Source: Bloomberg

Text

5/13

Page 5: September 2013, European Leveraged Loan Market Analysis

-0.4%

0.1%

0.6%

1.0%

1.5%

8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13

.

ELLI Multi-Currency Loan Return

TextAugust 2013: + 1.45%July 2013: + 0.39% Jan-Aug 2013: + 4.70%Jan-Aug 2012: + 6.34%

Source: S&P European Leveraged Loan Index

Page 6: September 2013, European Leveraged Loan Market Analysis

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0

5

9

14

18

7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13

Volume: New-Issue Loans vs. HY Bonds

HY bonds

Loans

€bill

ions

Text

Source: LCD - Leveraged Commentary & Data

€0.3B

€0.6B

Page 7: September 2013, European Leveraged Loan Market Analysis

0%

3%

6%

10%

13%

16%

2/09 2/10 12/11 2/12 8/130%

3%

6%

10%

13%

16%

2/09 2/10 2/11 12/11 8/13

.

ELLI Default Rates – European Leveraged LoansDefault Rate by Principal Amount Default Rate by Issuer Count

Text

Source: LCD - Leveraged Commentary & Data

Page 8: September 2013, European Leveraged Loan Market Analysis

Themes To Watch ForText

• Beyond a certain size / quantum of debt, issuers have to look towards the US market for liquidity and best execution, be that either through loans or bonds.

• There is a strong forward calendar for both loans and bonds, as issuers try to lock in favorable rates and terms.

• CLO calendar is still strong, though it doesn’t and won’t make up for the shortfall from what will disappear from the market when a number of CLOs go past their reinvestment period.

• Risk is back on, as seen by lower default rates and better manufacturing data, however any exogenous event can set things back again.

Page 9: September 2013, European Leveraged Loan Market Analysis

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