UPDATE 1-RLPC-EMEA lending totals $635.5 bln in first nine months
* Nestle's 10 bln euro refinancing was the biggest loan of the third quarter
* Investment-grade lending rose 4.5 pct in the first nine months to $366 bln, y-o-y
* Leveraged loan volume up 70 pct to $135 bln in first nine months, y-o-y (Adds details)
By Alasdair Reilly and Claire Ruckin
LONDON, Sept 30 (Reuters) - Syndicated lending in Europe, the Middle East and Africa (EMEA) was up 16 percent year on year to $635.5 billion despite the scarcity of revenue generating M&A financing, Thomson Reuters LPC data shows.
Competition between banks led to further falls in pricing for highly rated borrowers and to renewed demand for investment grade refinancing, helping to offset the subdued corporate M&A volume, while increased levels of activity in the leveraged market also boosted volume in the quarter.
"There is a different mood from the beginning of the year, now it's a lot more positive, there's a lot more good news about. Banks funding costs have come down, the loan market is liquid while the bond market is very strong," a senior banker said.
Despite the improved sentiment and banks' eagerness to underwrite deals, large ticket M&A has remained largely absent and volumes are down on the previous quarter across all regions.
Third quarter volume of $205.6 billion was 2.5 percent higher than the $200.5 billion seen in the second quarter, and 11 percent lower than the first quarter of 2013.
Loan volume in Western Europe increased 28 percent to $176 billion in the third quarter compared to the second quarter. Lending in Central and Eastern Europe sank 40 percent to $14.6 billion in the third quarter, while Africa and Middle East saw falls of 23 percent and 55 percent, to $6.9 billion and $8 billion, respectively.
Bankers have reported an uptick in potential M&A, and although July and August were quiet, September has seen the start of a wave of opportunistic corporate refinancing which is set to boost volumes in the fourth quarter.
Investment-grade lending to Europe's higher rated companies rose 4.5 percent in the first nine months to $366 billion, while high-grade M&A loan volume of $32 billion was nearly 50 percent down on the same period last year.
However, bankers remain hopeful that the return to more stable markets and lower loan pricing will lead to a pickup in M&A activity. Lenders can draw confidence from the success of Verizon's $61 billion bridge loan in the US, backing the $130 billion acquisition of Verizon Wireless and showcasing the loan market's potential capacity to bankroll large scale M&A.
"The Verizon deal gave us a startling recognition of just how much liquidity there is in the loan market and that liquidity is almost unlimited for the right name at the right time," a senior banker said.
Investment-grade refinancing volume totalled $279 billion in the first nine months, an increase of 32 percent year on year, and already over the full year 2012 total of $262 billion.
Fierce competition between banks to win loan mandates in a low deal flow environment has seen a dramatic fall in loan pricing, especially in Germany, where top-rated refinancing deals have seen margins halved from existing levels, prompting a wave of refinancing.
"We have seen the continuation of a trend which is very beneficial for highly-rated borrowers. Pricing has continued to tighten making 2014, 2015 and even 2016 maturities look expensive on a relative value basis and encouraging clients to refinance early," the second banker said.
Average single A rated margins fell in the third quarter to 28.75 bps down from 41.67 bps in the second quarter, while average triple B pricing continued to be squeezed, falling to 48 bps in the third quarter from the 66 bps in the first quarter, as borrowers took advantage of the competitive market to lock in future liquidity at lower costs.
The largest deal of the quarter was AA/A2 rated Swiss food giant Nestle's 10 billion euro ($13.54 billion) refinancing, which signed in September. The financing is split between a one-year facility and a five-year facility, paying typically ultra-thin margins of 10 bps over Euribor and 12.5 bps over Euribor, respectively, along with respective commitment fees of 1 bp and 3.75 bps on undrawn funds.
A-/A3 rated German car maker Daimler completed a 9 billion euro loan refinancing, securing a 27.5 bps margin and a maturity of five years with two one-year extension options, while A/A3 rated industrial gases firm Linde signed a 2.5 billion euro, 5+1+1 year refinancing in July that carried a margin of 26.25 bps for the company's split rating.
The European leveraged loan market remained steady in the third quarter, bringing leveraged loan volume to $135 billion in the first nine months - 70 percent higher than the same period of 2012 and 8 percent higher than in 2011.
"At the start of 2011 there was a sudden rush of LBOs but then the market shut down pretty quickly. This year has been far steadier, healthier and the market is in good shape. It would not be surprising if total volume of 2013 outstrips 2011," a European leveraged loan syndicate head said.
The majority was used for refinancing purposes as sponsors sought to take advantage of strong credit markets and refinance deals on better terms and in many cases conduct dividend capitalisations. M&A activity accounted for $19.8 billion, up 14.8 percent from the same period of 2012.
The largest leveraged loan of the quarter was the 2.1 billion pound ($3.39 billion) loan backing British motoring services firm the Automobile Association's refinancing followed by a 2.4 billion euro refinancing of German car parts supplier Schaeffler's holdco bank loans.
The largest European buyout loan of the quarter was the 1.97 billion euro loan backing BC Partners' 3.3 billion euro acquisition of German publisher Springer Science+Business Media.
Springer's buyout loan included a $1.591 billion U.S. dollar-denominated term loan and the fourth quarter is expected to see an increase in European companies accessing the US on refinancings and buyouts. This is bringing more covenant lite, higher leveraged deals with less amortising tranches to the European market.
The pipeline for 4Q13 is growing as companies continue to refinance and appetite for M&A is growing.
"It feels like there has been a lot of refinancing this year which has been tremendously dull but over all there is a greater impetus for M&A and a sense that it is coming in the fourth quarter," the leveraged loan syndicate head said.
BNP Paribas continues to lead the EMEA syndicated loan bookrunner table for 2013, with pro-rata volume of $32 billion from 142 deals. Deutsche Bank is second with $23.9 billion from 88 deals, while Societe Generale is a close third with $23.5 billion from 94 deals.
($1 = 0.7387 euros) ($1 = 0.6203 British pounds) (Editing by Christopher Mangham)
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Four dead in apparent Connecticut murder-suicide
- South Korea expands air defense zone to partially overlap China's |
- Singer Susan Boyle reveals she has Asperger's syndrome: paper
- Winter storm pushes up U.S. East Coast after deep-freeze in the South