High-Yield & Leveraged Capital Markets: Challenges Ahead?
Ultra-loose monetary conditions, better economic growth prospects and expectations for sustained below-average corporate default rates propelled high-yield and leveraged capital markets to near-record levels of activity in 2017. But what kind of market will 2018 turn out to be? Will the over-exuberance subside? What kind of appetite is there for leveraged buyouts?
Last year’s numbers tell a story: European high-yield bond issuance rose 45% in 2017 year-on-year to USD136bn; sponsored loan activity was up 58% to USD122.5bn; and buyside financial sponsor M&A volumes climbed 30% to USD662bn.
Borrowers found ample headroom to push for less restrictive documentation and greater leverage, while rampant liquidity – partially driven by ongoing yield tourism – facilitated bigger deal sizes and more aggressive deal structures. Yield spreads, meanwhile, were squeezed to post-global financial crisis lows early in 2018 and deals still continued to be over-subscribed in primary.
But as central banks alter their monetary stance and market technicals start to shift towards a more normalised pattern, are the good times expected to continue? Do the signs of spread volatility in certain names early in 2018 presage a shifting market or was it purely idiosyncratic?
Events Radar will convene an expert panel from across the market to review activity in the first quarter of the year and to discuss in an interactive forum what lies ahead for the remainder of the year.
Topics for discussion:
- Expectations for European high-yield debt and leverage loan issuance in 2018.
- Are there red-line event-risk deal-breakers on the horizon?
- How will the market break down in terms of borrowers’ rating profiles?
- Will the refinancing wave go into abeyance?
- What kind of year is 2018 shaping up to be in terms of LBO activity?
- Evaluating sponsor preparedness to pull the trigger on deals.
- Is banks’ willingness to commit funds a given? On what basis?
- Assessing the interplay between high-yield bonds and leveraged loans.