* Refinancing volume up 55 pct
* M&A loans at 14-year low
* Leveraged loan activity highest for six years
By Alasdair Reilly and Claire Ruckin
LONDON, Dec 31 Syndicated lending in Europe, the
Middle East and Africa (EMEA) rose 32 percent to $930 billion in
2013 from $703 billion in 2012 as borrowers took advantage of
improved market conditions to secure better terms on loans.
"The market has been demonstrably healthy in 2013 and there
is a lot of confidence for 2014. Volumes are up but there is a
lot more capacity in the market, with excess demand and not
enough supply. The markets can cope with more M&A and absorb
more volume in 2014. The market itself is in robust shape," said
a loan syndicate head, who declined to be named.
Refinancing made up nearly 70 percent of total loan volume
in 2013 as event-driven acquisition financing remained subdued,
according to Thomson Reuters LPC data.
Refinancing volume of $645 billion was 55 percent higher in
2013 as companies took advantage of competition between banks to
refinance existing loans early at cheaper pricing and longer
The wave of early refinancing helped boost the number of
deals, with 1,469 loans completed in 2013, a 20 percent increase
on 2012 and the highest number since 2007.
Despite decreased market volatility and the willingness of
banks to underwrite loans, M&A activity fell to a 14-year low of
$100 billion, as high company valuations and doubts over the
market recovery put off potential buyers.
High-grade lending to blue-chip companies rose 29 percent in
2013 to $540 billion, accounting for 58 percent of the market.
Investment grade companies refinanced $423 billion of loans,
61 percent higher than the $262 billion of loans that were
refinanced in 2012. M&A lending to top companies sank 32 percent
to $44 billion in 2013 from $65 billion in 2011.
The largest corporate loans of the year were a $17.34
billion refinancing for diversified natural resource company
Glencore Xstrata, a $14.21 billion loan backing Russian
oil company Rosneft's acquisition of a 50 percent
stake in TNK-BP; a 10 billion euro ($13.81 billion) loan
refinancing for Nestle ; and a 9.4 billion euro forward
start facility for Italy's biggest utility Enel.
Pricing for highly-rated companies dropped sharply
throughout 2013 due to improved bank liquidity and increased
competition between banks to win mandates to access
money-spinning ancillary business.
Average margins for single-A rated companies fell to 27.5
basis points (bps) in the fourth quarter of 2013, down from 40
bps level seen at the end of 2012. Pricing for triple B rated
companies dropped to 55 bps in the fourth quarter, down from 96
bps seen at the end of 2012.
The squeeze on pricing was also seen in Europe's peripheral
economies, such as Spain and Italy, as improving economic
conditions across Europe saw some banks expand credit limits.
In November Spain's Iberdrola became the first
peripheral borrower to achieve sub-100 bps pricing on its 2
billion euro loan refinancing, which paid 90 bps over EURIBOR.
Activity in Europe's leveraged loan market rose 63 percent
to $191.5 billion in 2013 from a year earlier. Volume reached
the highest level for six years, fuelled by refinancings.
Some 68 percent of leveraged loan volume - totaling $129.4
billion - was for refinancing purposes, compared with $44
billion of M&A financing, according to the data.
The largest pure European leveraged loan of 2013 came in the
first quarter, when British broadcast transmission provider
Arqiva refinanced 3.1 billion pounds ($5.12 billion) of loans.
Four out of five of the biggest leveraged loans this year
were refinancings, including a 2.1 billion pound deal for
British motoring services firm AA, and a 2.4 billion euro loan
refinancing of German car parts supplier Schaeffler's debt.
The largest leveraged buyout financing was 3.3 billion euros
of loans to back German investor Joh A Benckiser's 7.5 billion
euro acquisition of Dutch coffee and tea company DE Master
A strong pipeline of deals to syndicate in 2014 is building
and bankers expect to see more M&A activity, including the
potential sales of German packaging group Mauser by Dubai
Holding, German skin patch maker LTS Lohmann and Nordic payment
services company Nets Holding.
BNP Paribas topped the EMEA syndicated loan
bookrunner league table in 2013, with a $48 billion share of the
market from 208 deals. Deutsche Bank was second, with
$33 billion and 136 deals and Societe Generale was
third, with $32 billion and 133 deals.
($1 = 0.7239 euros)
($1 = 0.6051 British pounds)
(Editing by Louise Heavens)