Lpc european leveraged loans pick up pace in run up to year end

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Nov 24 Europe's leveraged loan market has been flooded with deals in the run up to year-end creating the busiest period since January, giving banks and investors the opportunity to put new money to work after a relatively quiet year. There are 12 deals in the market and some bankers predict another ten are due to launch before the end of the year. It comes after a busy November, which has already seen a large number of deals close and allocate onto the secondary loan market. The durability of the loan market following Brexit and Trump's surprise election and the sheer amount of liquidity available has prompted borrowers to issue loans while there is good visibility. A number of repayments to the loan market and new money raisings has led to vast amounts of money to put to work. The supply demand imbalance has been aggravated further by the improved CLO bid, as Triple As reprice lower, enabling CLOs to invest in lower yielding loans. The recent deal flow includes a mix of buyout loans, add-ons and dividend recapitalisations, providing a welcome break to the swath of repricings that picked up pace in September, which took up a lot of time but offered no solace to investors and bankers eager to invest in new paper."With the Triple A pricing coming down so quickly on CLOs and a lack of supply, it has allowed sponsors to line up buyout loans, refinancings, add-ons and dividends. The opportunistic stuff really started in October and that momentum has increased, so borrowers are pushing a little further. Why would borrowers want to miss out on the window, Christmas can do all sorts of things to the market," a syndicate head said. Borrowers are looking at deals including a 475m dividend recapitalisation for Dutch discount retailer Action; a 447m buyout financing for German residential and technical lighting products maker SLV and a 200m add-on for French medical diagnostics company Sebia.

Other recent popular deals include a 600m add-on for French veterinary pharmaceuticals firm Ceva Sante Animale and a 600m term loan for Liberty Global-owned telecommunications company UPC, both of which allocated this week. Although the deals are helping to ease the supply/demand imbalance in the market, they are unlikely to be a real test to liquidity."These deals will all get soaked up. Ceva, UPC, Action, they definitely help but we need some big deals and more new paper," an investor said.

ON THE WAY Deals coming the market include a 2bn leveraged loan financing to back Advent International's acquisition of French aerospace company Safran's biometrics and security business Morpho. Although a portion of this will be a refinancing of Oberthur Technologies' debt, as Morpho and Oberthur merge, there will still be a new money element. The deal had an early bird and will launch to general syndication on Monday. Other deals to come include a leveraged loan financing backing CVC-owned private hospitals operator Elsan's acquisition of French competitor MediPole Partenaires, which will take out 715m of high yield bonds; around 300m of loans backing Ardian's buyout of pharmaceutical firm Unither; and 250m of loans backing Bridgepoint's acquisition of Sapec Group's Agro Business.

Some 1.5bn of leveraged loans are also being lined up to back a potential sale of European web hosting provider Host Europe Group to web hosting firm GoDaddy, after the two companies entered exclusive talks. Banks - expected to include Barclays, Citigroup, Deutsche Bank, Morgan Stanley and RBC - are lining up the financing, which could launch before year-end, if a deal is struck. Elsewhere, banks are committing to underwrites for auction processes, which if successful could see a swath of leverage buyout loans hit the market in January. This could be for companies including German bandage and plaster cast maker BSN Medical, British holiday park operator Parkdean Resorts French laboratory business Cerba."It is not looking terrible for next year. There could be a decent, improved amount of supply but it won't bring about a complete change to the technical picture," the investor said. After that, the picture doesn't look too optimistic. The market has tightened over the past couple of months, making many of the repricings done in September and October out of sync with the more recent, tighter yielding credits. Once soft-call is up, the market could see a second wave of repricings come February/March time.