29 Sep 2015

European High Yield and Leveraged Loan Report: Q2 2015

Highlights

European leveraged finance issuance (leveraged loans and high yield bonds) decreased in 2Q’15 to €55.0 billion, a 4.8% decrease quarter-over-quarter (q-o-q) and a 41.2% decrease from a record setting €93.5 billion in 2Q’14. The quarterly decrease stems from the large fall in high yield bond issuance, which decreased by 15.6% in the second quarter of 2015 while the leveraged loan issuance in-creased by 12.4%; the high yield share of the leveraged fi-nance market decreased to 54.2%, down from 61.2% in 1Q’15.

Market and Economic Environment

According to the July 2015 European Central Bank lend-ing survey, credit standards for loans to enterprises, con-sumer credit and loans to households, both for and other than for house purchase, eased in net terms in the second quarter of 2015, supporting the recovery of loan growth. In 2Q’15, euro area banks reported a net easing of credit standards on loans to enterprises for the fifth consecutive quarter, driven in particular by banks’ competition and cost of funds. Looking ahead to the third quarter of 2015, euro area banks expect no further net easing of credit standards on loans to enterprises. Across firm size, credit standards were eased on loans to both large firms and small and medium-sized enterprises (SMEs). Credit stand-ards on loans to enterprises continued to ease in France and, more particularly, Italy. They were unchanged in net terms in Spain and in the Netherlands, while banks in Germany reported a marginal net tightening in standards.

Net demand for loans to enterprises improved significant-ly in 2Q’15 mostly due to general level of interest rates and fixed investment. The net percentage of banks re-porting an increase in demand for loans to enterprises was 13%, up from 1% in the previous quarter. Banks reported a further strong net increase in the demand for housing loans as well. The net percentage of banks reporting an increase in demand for housing loans in the second quar-ter was 49%, up from 30% in the previous quarter.