Leveraged loan volumes down in Q2

Leveraged loan volumes across Europe dropped in the run up Brexit, a study has found.

Total European leveraged loan volumes dropped by 4 percent in the second quarter of 2016, valued at €16.4 billion compared with the same period last year. The decline was more pronounced in the UK as loan volumes dropped by almost 30 percent to €2.1 billion, significantly down on the €2.9 billion figure from the same period last year.

It is the latest quarterly report focusing on the UK mid-market from financial advisory firm Marlborough Partners. In the previous quarter UK leveraged loan volume was around €2.5 billion, which demonstrates that as it got closer to Brexit the market became more cautious.

The decline in UK issuance was attributed to “lower non-sponsored volumes and refinancing activity as transactions were withheld in anticipation of the EU referendum”.

On a positive note for the European market, CLO issuances for the second quarter surpassed last year’s total, reaching €4.6 billion, a small improvement on the €4.5 billion from 2015. One effect, the report noted, is that it is driving the secondary market higher.

But on the aftermath of Brexit, the report remained buoyant. Lenders and sponsors are understood to be keen to complete transactions even in an environment where dealflow is understood to have slowed down. However, the firm reported that a number of firms based outside of the UK are continuing to adopt a “wait and see” attitude as the UK’s future position outside of the European Union remains unclear.