RLPC-EMEA lending down 34 pct at the half year
* Lending in the doldrums as companies shun debt
* Second quarter busier but first half down overall
* Leveraged loans feel the impact of eurozone crisis
By Tessa Walsh
LONDON, June 29 (Reuters) - Syndicated lending in Europe, the Middle East and Africa (EMEA) slumped 34 percent to $343 billion in the first six months of 2012 to 2003 levels as eurozone turbulence put companies off borrowing, Thomson Reuters LPC data shows.
Loan volume and deal flow have been crushed as deleveraging banks moved to increase tier 1 capital ratios under pressure from regulators and companies have been deterred by weak debt markets as the eurozone crisis intensified.
Falling dealflow raised fears of overstaffing and possible headcount reduction as income remains under pressure. Only 519 deals were completed in the first six months, 32 percent lower than the same period of 2011.
Although second quarter volume of $187 billion was 20 percent higher than $155 billion in the first quarter, it is still 34 percent lower than the second quarter of 2011.
Lending rose across the region in the second quarter in all areas other than the Middle East. The biggest pick up in activity was seen in Central and Eastern Europe.
Banks had money to lend to key clients, but the main issue facing the market was the lack of activity as companies remained wary of new loans and mergers and acquisitions (M&A) activity remained depressed in volatile markets.
"The second quarter was disappointing because of the lack of deals and activity and low levels of M&A," Kristian Orssten, managing director and head of JP Morgan's European loan and high-yield capital markets group said.
Despite a dramatic macroeconomic backdrop as Spain's banking sector sought a bailout before the Greek elections in late June and ratings agencies' mass bank downgrades, the loan market remained open for business.
The market even managed to syndicate some large loans from peripheral Europe despite the turbulence as sovereign borrowing costs blew out.
The largest loan of the quarter was a 30 billion euro loan for Spain's Fund for the Payment of Creditors (FFPP) that will be used to refinance local and regional governments and repay creditors. The five-year loan was guaranteed by the Spanish Treasury and through local authorities share of state income.
The transaction propelled BBVA to the top of the loan bookruner tables with $12.35 billion of loans and a 5.4% market share and put Santander in third place after Credit Agricole.
An 11 billion euro loan was also syndicated for Italian gas operator Snam to fund its separation from Eni and the repayment of debt to the oil and gas giant.
A total of $227 billion of loans were raised for highly-rated companies in the first half, more than double the $111 billion of corporate loans raised as bond activity slowed.
In the second quarter, $133 billion of corporate loans were raised, compared to $36 billion of corporate bonds.
The largest investment-grade loan of the quarter was a $7.8 billion loan backing Gaz de France's acquisition of International Power.
Investment-grade lending picked up 40 percent in the second quarter from the first. High-grade M&A activity rose 53 percent to $15.4 billion, although refinancing volume fell to $54.73 billion in the second quarter from $78.5 billion in the first quarter.
LEVERAGED SLOWS The European leveraged loan market which banks riskier, more indebted companies felt the main impact of the eurozone crisis. First half leveraged loan volume of $57.18 billion was 29 percent lower than the first half of 2011.
Activity continued to slow as investors became increasingly risk conscious. Second quarter volume of $21 billion was 42 percent lower than the first three months.
Leveraged loans outstripped high-yield bonds at the half-year, which saw $37.6 billion of bonds, and also in the second quarter, when only $8.37 billion of high-yield bonds were logged after that market closed.
The largest leveraged loan of the quarter was the $1.6 billion loan for French clothing retailer Vivarte as larger leveraged companies continued to amend their loan facilities and extend maturities.
Towards the end of June, deteriorating sentiment took a toll on the syndication of new buyouts for tax free shopping business Global Blue and French eyeglasses maker Alain Afflelou.
Discounts were added to sell the loans before the summer holiday period, in a bid to avoid last year's expensive post-summer pile up.
The move made underwriters more nervous about underwriting new deals over the summer as investors moved into a more defensive mode.
"Investors are very focussed on credit. They are ultra cautious and worried about price risk " a senior syndicator said.
(Reporting by Tessa Walsh)
- Tweet this
- Share this
- Digg this