Europe Highlights

  • Opportunistic activity helped boost loan issuance in H1 2019 with a large uptick in the number of refinancings, accounting for 46% of mid-market sponsored loan transactions by deal count for the YTD, compared to 38% in 2018
  • The UK mid-market has seen the highest number of sponsored loan transactions in the first half of the year, taking 36% of the share based on the deal count as sponsors take advantage of opportunistic market conditions
  • We expect the second half of the year to be a period of further volatility with continued bifurication between good and bad credits. Good credit stories such as highly recurring revenues will become increasingly valued with difficult credit stories (e.g. seasonal and consumer focused companies) being penalised

LBO transactions per region

UK Highlights

  • The UK mid-market has seen a spike in refinancing activity in the first half of the year compared to the prior year
  • Sponsors continue to take advantage of opportunistic market conditions
  • With Brexit uncertainty continuing into H2, we expect to see further flight to quality. We see exceptionally strong investor demand for ‘resilience’ and a limited bid (if any) for more challenged issuers

Type of refinancing by structure (UK)

The continued dominance of direct lenders has continued in recent quarters, with unitranche accounting for c.50% of deal volume  followed by club deals at 35%

France Highlights

  • In the first half of the year, volumes remained stable but below record highs of the prior year
  • Direct lenders continue to gain market share, delivering sizeable, flexible financing solutions to issuers
  • Issuers are willing to pay a credit fund premium to secure requisite flexibility to support ambitious development plans
  • Competition among lenders is predicted to remain high, supported by a relatively strong macro backdrop

Number of deals per quarter (France)

Leveraged financing volumes continue to be healthy, driven by a pick-up in refinancing activity with 13 refis completed in Q2 2019 (vs 10 in Q1 2019)

DACH Highlights

  • The DACH mid-cap leveraged debt market has experienced a rather quiet Q2 2019, with senior banks and direct lending funds competing for a very limited number of opportunities, with a mixed quality M&A pipeline
  • Notable primary buyouts closed in the healthcare sector
  • Acquisition financing activity is expected to drive volumes in the second half of the year, with direct lenders increasing their market share as banks reduce their LBO exposure

Issue volume per deal type (DACH region)

DACH leveraged loan mid-market volumes remain relatively depressed versus prior years. Recent activity was dominated by primary buyout activity, with senior lenders retaining a sizeable market share

Spain Highlights

  • The Spanish leveraged loan market remained strong with several large M&A transactions such as UAX, CEPSA and Telepizza, supported by large underwriting appetite
  • In terms of domestic liquidity, the top 3 Spanish banks continue to dominate, however private credits fund gradually increasing their market share
  • Amidst a weakening economic backdrop, we expect to see tightening credit conditions and reduced lender appetite resulting in falling average leverage ratios and lower loan volumes in the second half of the year

Following a modest 4Q18 (only 6 deals tracked in the quarter), Spain has seen a pickup in leveraged loan activity in 1H19, with 13 deals in Q2 and 12 deals in Q1