The leveraged loan and high yield bond markets have both had slow starts to the year, with loan issuance down 39% year-over-year and bonds off 55%.

Notably, the leveraged loan market, at EUR 33.4bn, posted its lowest quarterly volume since 2Q16, while the institutional loan segment totalled only EUR 18bn. Looking at the makeup of this limited loan deal flow, M&A-related activity accounted for 40% of issuance, with bond refinancings at 10% and dividend recaps at 9%. On the non-new money side, loan refinancings accounted for 36% of activity.

High yield bond volume, at EUR 9.5bn in 1Q19, was down more than 50% from the year ago period and was only marginally above the 4Q18 level. There was a distinct lack of bond issuance backing M&A-related activity in 1Q19, and deal flow was heavily tilted toward the higher rated end of the market, with BB credit dominating. The European high yield bond market was a marked contrast to the US market, which posted its best quarter since 4Q17, helped by improved sentiment and inflows into bond funds.

While the European market showed some improvement as the quarter progressed, with issuance climbing in each month of the first quarter, it still topped out at only EUR 4bn in March. In turn, the European share of combined US/Europe high yield bond issuance fell sharply in 1Q19 to date. The European share tumbled to 16% in 1Q19, compared to roughly 34% in each of the prior three years.

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Colm (C.J.) Doherty Global Head of Primary Market Analysis Debtwire

Colm Doherty is Debtwire’s Global Head of Primary Market Analysis. He is responsible for leading the production of primary market analysis and reports focused on the leveraged loan and high yield bond markets. Prior to joining Debtwire, Colm was Director of Analysis at Thomson Reuters LPC covering leveraged loans, CLOs and high yield bonds.

Colm has a B.A. in Economics & Legal Science from National University of Ireland Galway and an MSc. in Accounting & Finance from Ulster University.