The Report contains European leveraged finance market trends for Q1 2024. In particular, it includes issuance, valuations, and credit performance figures for the European high yield and leveraged loan markets.

Key highlights:

• European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €128bn in proceeds in Q1 2024, a 115% increase compared to €59.4bn issued in Q1 2023. The increase is attributable to a rise in both high yield issuance and leveraged loan origination.

• High yield bond issuance accumulated €40.4bn in proceeds during Q1 2024, an increase of 206% YoY and 157% QoQ. High yield bond proceeds were primarily used to repay or refinance debt (€29.9bn or 54.4% of the total), followed by general corporate purposes (€14.8bn or 36.6% of the total).  The financial, customer discretionary, and communications sectors accounted for 62.1% of the issued amount.

• Leveraged loans generated €87.7bn in proceeds during Q1 2024, up from €46.1bn during the same period last year (+90%) and €54.1bn in the past quarter (+62%). The healthcare, professional services, and insurance sectors led origination, representing 37% of the quarter’s proceeds. Institutional spreads (3-month rolling average) gradually tightened over the quarter while remaining consistently above pro-rata spreads and ending the quarter at 408bps. Pro-rata spreads shortly rose to align with institutional spreads in February 2024, but dropped to 290bps by the end of the quarter.

• Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 4.11% in March 2024, an increase from 3.47% in December 2023. Moody’s reported the speculative-grade bond default rate at 3.60% in March 2024, relatively unchanged from the 3.54% recorded in December 2023 but up from the 2.59% of March 2023.

11 bond defaults were reported by Moody's and Standard and Poor's during the last quarter of the year.

Fitch reported a trailing 12-month European leveraged loan default rate of 3.8% in March 2024, down from 4.39% in December 2023.

According to Reorg, 100% of the European leveraged loan deals examined in the first quarter of 2024 were covenant-lite.