Western European leveraged loan issuance backing LBOs has declined by 37% to EUR 22.4bn year-to-date, while the institutional loan segment is down 22% to EUR 17.2bn. 

Despite this decline in LBO loan supply, the share of higher levered LBOs has trended lower this year. Adjusted leverage on LBOsaverage 5.7x so far in 2019, down slightly from 5.8x in 2018 and 5.9x in 2017 (based on deals for which Debtwirehas collected this data).

Over one-third (38%) of LBOs this year are levered 6x or more, down from 49% in 2018.  At the upper-end, the share of deals in the 7x or greater category has slipped to 13% from 20%. At the lower-end, the share of deals levered less than 5x has declined by 10 percentage points to 19%. In turn, deals in the 5-6x category are the most popular year-to-date.

Despite the recent shift lower in adjusted leverage, larger EBITDA addbacks in the last couple of years have pushed leverage higher on an unadjusted basis. Lenders say they have addressed this by doing their own credit analysis to determine the addbacks and resulting leverage that best represent the credit.

-Colm (CJ) Doherty colm.doherty@acuris.com

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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.