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European Chart of the Week: The missing post-coronavirus margin spike
European Chart of the Week: 18th May 2020
As the loan market begins to thaw from the coronavirus-freeze, the trickle of loans has so far shown that, surprisingly, pricing is seemingly unchanged from where it was when the first rumblings of the pandemic were felt.
However, this paints a highly skewed picture as there hasn’t been a single new-money deal in Europe, while the deals that have come are solid credits, tapping existing creditors for liquidity. These have received a welcome from buy siders – even allowing upsizing and tightening of margins.
The margins of single B rated TLB facilities so far average Euribor+ 391bps in the first quarter, with mean pricing since the freeze at E+ 400bps, while BB-rated pricing over the last month remained in line with the same period last year.
Nielsen’s EUR 420m TLB and Synlab’s EUR 468m TLB are the only deals so far to have hit the leveraged loan market. They both priced in May with margins of E+ 375bps and E+ 400bps, respectively.
The high yield bond market, with its stark lack of any issuance in March, shows a similar story, where B rated deals since the break priced at 5.2% on average from an average of 5.0% the prior year – with respective figures for BB-rated deals coming in at 2.7% versus 3.3%.
We have yet to see how the deep freeze affects pricing once the market reopens fully, especially for riskier credits, as they have yet to make it through syndication. Last Friday (15 May), Sappi canceled its EUR 250m senior unsecured note offering due to unsatisfactory market conditions, showing that the melting waters might not be calm for long.
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