Brexit shadow results in deal shortfall – study

The number of leveraged loans and high yield volume dropped in Q1 2016 compared with the same period last year. One of the factors cited is the uncertainty around the Brexit vote.

The uncertainty of the EU referendum has resulted in the number of leveraged loans and high yield volumes dropping in the first quarter of 2016 compared with the same period last year, a study has claimed.

Figures reported by the private equity debt advisory firm Marlborough Partners show that the overall amount of leveraged loans finalised in the period was €13.3 billion in the first quarter, significantly down from €21.4 billion last year. High yield volume totaled €7 billion, a third of the €23 billion completed in the same period last year. Deals that priced were strong credits, ‘must-get-dones’ and ‘short time-to-market’ deals.

In the UK, the leveraged loan volume in the first quarter was €2.5 billion, 63 percent lower than the €6.8 billion in the same period last year.

The debt advisory firm points to a number of macro-economic issues, such as the fluctuation of oil prices and market turmoil in China, but Taddeo Vender, managing director at Marlborough, told PDI that Brexit is a key concern.

“There will be greater uncertainty if leave wins as there will be a vast number of actions, negotiations and agreements that will need to be undertaken as a consequence. There are too many unknowns in the equation compared to a vote to stay,” he said.

The latest poll from YouGov shows 42 percent of voters backing leave, with 40 percent opting to remain. While the firm does not have an official position on the referendum vote, it does point to the potential of an economic slowdown, which may have an adverse impact on the travel, financial and property markets if the UK votes for Brexit.

Vender said that it is difficult to measure the potential impact, because the number of variables in the scenario are impossible to quantify. Nevertheless, he said that he expected deal flow to pick up once the vote has taken place. “Private equity firms will still be buying companies, debt funds will still be lending despite how the vote goes.”

In additional news, Marlborough has confirmed the appointment of Tim Metzgen as a managing director at the firm to lead their push into the UK corporate debt advisory market. Before joining Marlborough, he worked on KPMG's debt advisory team responsible for corporate lending.

David Parker, Marlborough managing partner, said Metzgen’s appointment “is an extremely important step in broadening our product and client coverage capabilities and he will be invaluable in further developing our business in the UK”.