Europe Set for Leveraged-Loan Deluge Even as Investors Shun Riskby
About 4.9 billion euros of deals may come to market in weeks
Total is about 10% of amount raised in market last year
Global financial turmoil has failed to deter issuers in Europe’s leveraged-loan market.
About 12 European deals, totaling around 4.9 billion euros ($5.3 billion), are set to come to market in next few weeks, based on details from people familiar with the various plans. The loans all stem from acquisitions made last year by private equity firms, including KKR & Co. and TDR Capital.
Achieving the total, which equals about 10 percent of 2015’s full-year tally, will depend upon high lending rates luring investors to risky debt even as volatility in Chinese shares and low commodity prices roil markets. Help may come from European leveraged loans’ seven straight annual gains and from unfulfilled demand among arrangers of collateralized loan obligations, the biggest buyers of the debt, following a plunge in issuance last year.
“The European leveraged-loan market is very well bid thanks to massive scarcity of product and too much demand,” said Mahesh Bhimalingam, head of European credit strategy at BNP Paribas SA in London. The sector is proving “much less volatile” than markets now in turmoil, he said.
The global asset selloff has hurt corporate junk bonds, with the average yield on euro-denominated notes surging to the highest in more than three years, based a Bank of America Merrill Lynch index.
The biggest deal expected in Europe’s leveraged-loan market is from Euro Garages. The U.K. gas-station operator is seeking 620 million pounds ($900 million) in sterling and euro term loans, according to a person familiar with the matter, who asked not to be identified as they aren’t authorized to reveal the information. The funds, part of a wider financing package, will be used for TDR Capital’s acquisition of a minority stake in the company.
KKR is seeking the equivalent of 500 million pounds for its purchase of LGC, a U.K. medical measurement and testing company, from private equity firm Bridgepoint. IK Investment Partners is working on raising 173.5 million euros for its buyout of foodmaker Salad Signature.
“This week is a decent start to the year,” said Desmond English, a London-based fund manager at Pioneer Investments, which oversees 217 billion euros. “It does look like we are going into the first quarter with a relatively healthy pipeline.”