If You Thought Leveraged Loans Were Too Heated, Look Away Now
- Lack of supply and fierce demand have put borrowers in charge
- Companies are pushing down margins on new and existing deals
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The temperature gauge is flashing red again in the European market for leveraged loans. Here are some of the signals that show borrowers have the upper hand in contrast to the pre-summer months when investors held sway.
New-issue spreads have dropped from their recent peak as appetite for loans overtook thinning supply. October turned out the lowest monthly new issuance of 2017, and lenders have only faint hopes of a resurgence in fresh supply before year-end to restore the balance. Single-B deals in the three months to Oct. 31 paid 388 basis points over Euribor on average, down from 426 basis points in the third quarter, according to data compiled by Bloomberg.