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Leveraged loans climb to highest quarterly total since crisis

Total leveraged loan totals reached €50.8bn in Q1, according to an AFME report, with the majority taking a first lien position.

European leveraged loan issuances in the first quarter reached their highest levels since the global financial crisis, figures from research firm Association for Financial Markets in Europe show.

A total of €50.8 billion of financings were made in Q1 – an almost 20 percent increase compared with the final quarter of 2016 and 54.2 percent increase on the 2016 first-quarter total. First lien loans made up the vast majority of this amount with refinancings accounting for 81 percent of transactions – dwarfing both leveraged buyouts and acquisitions.

The AFME report noted that the credit standards on corporate loans made to both small and medium-sized enterprises and larger enterprises “eased slightly”, with a pronounced shift visible both in Germany and Italy. The report attributed this trend to intensifying competition in the European lending market.

“Banks’ overall terms and conditions on new loans also eased across all loan categories in the first quarter, driven largely by further narrowing of margins on average loans, while margins on riskier loans remained broadly unchanged,” the report said.

Issuance of high yield bonds climbed to €35.7 billion across 76 deals – more than double the amount in the previous quarter.

As private debt funds continue to increase in size, many are looking to underwrite larger tickets, with many encroaching upon the leveraged loan and high yield space. Earlier this year, Permira Debt Managers provided a £375 million debt package refinancing the existing debt of Soho House, after the firm previously attempted to refinance in the capital markets in 2015.

But the AFME report highlights that high yield bonds are popular among larger corporates and investors at the moment, showing a big spike since the start of the year.

Telecommunication, chemical and healthcare companies made up the majority of industries tapping the public markets, making up a total of 47.7 percent of issuances in the first quarter. Notable bond issuances include Telecom Italia’s €1 billion bond and metals company ThyssenKrupp’s $1.25 billion bond.