The Report contains European leveraged finance market trends for the first quarter of 2023, which includes issuance and credit performance figures for the high yield and leveraged loan markets.
 

Key highlights:

• European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €41.8 billion in proceeds in 1Q’23, an 11.8% increase from €37.4 billion in 4Q’22 and a 30.5% decrease from €60.2 billion in 1Q’22.
   
• High yield bond issuance totalled €12.7 billion on 36 deals in 1Q'23, an 18.5% increase from €10.7 billion in 4Q’22 and a 22.7% decrease from €16.5 billion in 1Q’22.
  
  The proportion of USD-denominated issuance increased to 11.2% of all issuance in 1Q’23, up from 5.2% in 4Q’22 but down from 22.3% in 1Q’22.
  
  The leading use of proceeds for high yield bond issuance in 1Q’23 was general corporate purposes, at €7.2 billion, which was higher than €6.5 billion in 4Q’22 and than €3.6 billion in 1Q’22.
  
  Preliminary data for 2Q’23 as of end May shows that high yield bond issuance has recently increased with volumes already close to those issued in the entire first quarter (€8.3 billion in April and €3.7 billion in May), although below the monthly average observed in 2021 (€13 billion).
   
• Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €29.1 billion in 1Q’23, up 9.2% from €26.6 billion in 4Q’22 and down 29.4% from €41.2 billion in 1Q’22.
  
  70.5% of deals financed in 1Q’23 were issued for refinancing and/or repayment of debt, up from 63.2% in 4Q’22, and from 41.6% in 1Q’22.

• Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 3.0% in March 2023, an increase from 2.2% in December 2022. Moody’s reported the speculative-grade default rate at 2.6% in March 2023, down from 2.8% in December 2022.
  
  There were 11 bond defaults reported in the 1Q’23 by Standard and Poor’s and Moody’s. The reasons were missed principal payments (for 6 of them) and distressed exchange (for 5 of them).
  
  Fitch reported an increase in European Leveraged Loan default rates (by number of deals) to 1.6% in March 2023 from 1.3% in December 2022.
  
  According to Reorg, all the European leveraged loan deals examined in 1Q’23 were covenant-lite.