The Report contains European leveraged finance market trends for the third 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 €29 billion in proceeds in 3Q’23, a 47% decrease from €55 billion in 2Q’23 and down 48% from €55 billion in 3Q’22.
- High yield bond issuance totalled €17.2 billion on 46 deals in 3Q'23, a 14% decrease from €20 billion on 60 deals in 2Q’23 and a 244% increase from €5 billion on 20 deals in 3Q’22.
The proportion of USD-denominated issuance went slightly down to 24.7% of all issuance in 3Q’23 from 24.8% in 2Q’23 but up from 17.7% in 3Q’22.
Preliminary data for 4Q’23 as of end November shows no signs of a rapid rebound in issued amount, with a monthly average of €5.4bn in October and November of 2023 (vs. €5.7bn monthly average in 3Q’23).
- Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €29 billion in 3Q’23, down 47% from €54.9 billion in 2Q’23 and down 48% from €55.5 billion in 3Q’22.
Three sectors accounted for 53% of leveraged loan issuance in 3Q’23. The leading sector was Healthcare (€6.8 billion or 23.5% of total), followed by Professional Services (€4.6 billion, 15.9%), and Food & Beverage (€3.9 billion, 13.5%), with the balance split between 17 other sectors.
- Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 3.1% in September 2023, a slight increase from 3.06% in June 2023. Moody’s reported the speculative-grade default rate at 3.14% in September 2023, up from 2.96% in June 2023.
There were 8 bond defaults reported in the 3Q’23 by Standard and Poor’s and Moody’s. The most frequent reasons were distressed exchange (for 5 of them) and missed principal payment (for 3 of them).
Fitch reported an increase in European Leveraged Loan default rates (by number of deals) to 3.9% in September 2023 from 1.6% in December 2022.
According to Reorg, 88% of the European leveraged loan deals examined in 3Q’23 were covenant-lite.