20 Nov 2015

European High Yield and Leveraged Loan Report: Q3 2015

Highlights

European leveraged finance issuance (leveraged loans and high yield bonds) decreased in 3Q’15 to €23.7 billion, a 56.9% decrease from €55.0 billion quarter-over-quarter (q-o-q) and a 39.3% decrease from €39.0 billion in 3Q’14. The quarterly decrease stems from the large fall in high yield bond issuance, which decreased by 71.2% in the third quarter of 2015 while the leveraged loan issuance decreased by 40.0%; the high yield share of the leveraged finance market decreased to 36.2%, down from 54.2% in 2Q’15.

Market and Economic Environment

According to the October 2015 European Central Bank lending survey, credit standards for loans to enterprises, consumer credit and loans to households other than for house purchase eased in net terms while credit standards on loans to households for house purchase tightened in the third quarter of 2015, continuing to support the re-covery of loan growth. In 3Q’15, euro area banks report-ed a further net easing of credit standards on loans to en-terprises for the sixth consecutive quarter, driven in par-ticular by banks’ competition and risk perceptions. Look-ing ahead to the fourth quarter of 2015, euro area banks expect a further net easing of credit standards on loans to enterprises. Across firm size, credit standards were eased mainly on loans to small and medium-sized enterprises (SMEs) and were broadly unchanged for large firms. Credit standards on loans to enterprises improved in Italy, remained unchanged in Germany, Spain and the Nether-lands and tightened in France.

Net demand for loans to enterprises continued to increase in 3Q’15 mostly due to favorably low level of interest rates. The net percentage of banks reporting an increase in demand for loans to enterprises was 16%, up from 13% in the previous quarter. Banks reported a 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 third quarter was 33%, down from 49% in the previous quarter.