10 Jun 2015

European High Yield and Leveraged Loan Report: Q1 2015

Highlights

European leveraged finance issuance (leveraged loans and high yield bonds) more than doubled in 1Q’15 to €57.7 billion, a 112.8% increase quarter-over-quarter (q-o-q) and a 25.2% increase year-over-year (y-o-y). The increase q-o-q stems from the large rise in high yield bond issuance, which more than quadrupled in the first quarter of 2015; the high yield share of the leveraged finance market in-creased to 61.2%, up from 30.4% in 4Q’14.

Market and Economic Environment

According to the April 2015 European Central Bank lend-ing survey, credit standards for loans to enterprises, con-sumer credit and loans to households other than for house purchase continued to ease in net terms in the first quarter of 2015, while the credit standards for loans to households for house purchase tightened slightly in net terms. Despite the easing in most categories during the quarter the European Central Bank stated that the level of credit standards is still relatively tight in historical terms. In 1Q’15, euro area banks reported a net easing of credit standards on loans to enterprises for the fourth consecu-tive quarter driven in particular by banks’ cost of funds and balance sheet constraints and competition.

Across firm size, credit standards were eased on loans to both large firms and small and medium-sized enterprises (SMEs). Credit standards on loans to enterprises have im-proved in all large euro area countries except for Spain, in particular in Italy, and switched from a net tightening to a net easing in the Netherlands.

Net loan demand continued to be positive for loans to en-terprises, but fell back from the high level reported in the fourth quarter of 2014. Net demand for loans to enter-prises continued to improve, however at a slower pace. The net increase in demand was 6% in 1Q’15, down from 18% in the previous quarter. Net demand for housing loans continued to increase at a fast pace (29%, up from 24% in the previous quarter), while it remained broadly stable for consumer credit (13%, after 14%).