14 Mar 2016

European High Yield and Leveraged Loan Report: European Leveraged Finance - Q4 2015

Issuance

European leveraged finance issuance (leveraged loans and high yield bonds) decreased in 4Q’15 to €25.6 billion, a 13.3% decrease from €29.6 billion quarter-over-quarter (q-o-q) and a 5.4% decrease from €27.1 billion in 4Q’14. The quarterly decrease stems from the large fall in leveraged loan issuance, which decreased by 30.0% in the fourth quarter of 2015 while high yield bonds issuance increased by 8.0%; the high yield share of the leveraged finance market increased to 54.9%, up from 44.1% in 3Q’15.

In full year 2015, European leveraged finance issuance decreased to €171.1 billion, down 16.8% from €205.7 billion in 2014. Leveraged loan issuance decreased by 20.9% to €75.7 billion in 2015 from €95.6 billion in 2014, while high yield bond issuance decreased by 13.4% to €95.4 billion in 2015 from €110.1 billion in 2014./

Market and Economic Environment

According to the January 2016 European Central Bank lending survey, in the fourth quarter of 2015, credit standards on loans to enterprises eased further as those on housing loans returned to a net easing, continuing to support the recovery in loan growth. In 4Q’15, euro area banks reported a further net easing of credit standards on loans to enterprises for the seventh consecutive quarter, driven in particular by banks’ competition, while risk perceptions contributed only marginally to such easing. Looking ahead to the first quarter of 2016, euro banks expect a further net easing in standards on loans to enterprises, broadly unchanged standards for housing loans and a return to a net easing for consumer credit.

Across firm sizes, credit standards eased more strongly on loans to small and medium-sized enterprises (SMEs) than on loans to large firms. For the large euro area countries, credit standards on loans to enterprises continued to ease considerably in Italy and remained unchanged in the other countries, with the exception of France where they continued to tighten in net terms.

Net demand for loans to enterprises continued to increase in 4Q’15, mostly due to the low general level of interest rates. Net loan demand by enterprises increased to 27% in 4Q’15, up from 16% in the previous quarter. Banks reported a net increase in the demand for housing loans and consumer credit as well. The net loan demand for housing loans was 29%, slightly lower than 33% in 3Q’15 while net demand for consumer credit increased to 21% in 4Q’15 from 19% in 3Q’15.