Subordinated debt is making a return in the leveraged buyout space as senior lending falls back, according to research by LCD, a unit of S&P Global Market Intelligence.
As M&A activity begins to pick up, larger deals are emerging and have led to increasing use of second-lien and high-yield bonds, LCD said.
The first quarter of 2018 saw deals exclusively using senior debt among European sponsored borrowers fall from a peak of 77.5 percent in 2016 to 58.5 percent, its lowest share since 2014.
Senior plus second-lien debt deals reached the highest percentage since 2007, accounting for 17 percent of all deals completed in Q1 2018. This is well ahead of recent trends which saw senior and second-lien deals account for an average of just 7 percent of deals from 2015 through to 2017.