* Company demand for syndicated loans still patchy
* Banks hunt yield in emerging markets, periphery
* Leveraged lending dominated by refinancing and repricing
* French banks return to top of loan league table
By Alasdair Reilly and Claire Ruckin
LONDON, March 28 Syndicated lending in Europe,
the Middle East and Africa (EMEA) rose 13 percent to $185
billion in the first quarter of 2013 compared to the first three
months of 2012 as borrowers took advantage of banks' renewed
appetite to lend.
The European syndicated loan market returned to health in
early 2013 with strong liquidity after aggressive deleveraging
in 2011 and 2012 boosted banks' capital and helped them to
comply with new regulations.
Banks are liquid and willing to lend, but demand from
borrowers remains patchy as the eurozone crisis continues to
weigh on companies' confidence and sentiment.
"It's a very mixed picture. Apart from a few large deals,
the investment grade market is very quiet. The leveraged market
is looking very busy and there is also a lot happening in the
emerging markets," a senior banker said.
Although first quarter volume is healthy compared to the
same period of 2012, the EMEA loan market had the lowest number
of deals since late 2008 with only 210 deals completed in the
Average deal sizes however topped $880 million, up from the
average $575 million in 2012, as several highly-rated companies
returned to the market to refinance large loans, Thomson Reuters
LPC data shows.
The market saw increased activity in the peripheral
economies of Spain and Italy, as well as in the emerging markets
as banks looked for yield in riskier markets, bankers said.
Italy and Spain saw volumes of $20 billion and $14 billion
respectively in the first quarter as top companies such as Enel
, Telecom Italia and Telefonica took
the opportunity to refinance and extend credit lines.
Loan volume in Central and Eastern Europe, including Russia,
was up 194 percent to $20.73 billion in 1Q13 compared to the
same time last year. Russian volume made up over $17 billion of
High grade lending to blue-chip companies increased 15
percent to $126 billion in the first quarter, compared to $97
billion a year earlier as the loan market regained ground
against the corporate bond market.
Corporate loan volume exceeded corporate bond issuance in
the first quarter, when $104 billion of corporate bonds were
issued. This was a reversal from the fourth quarter of 2012,
when $107 billion of corporate bonds were issued, compared to
only $67.13 billion of corporate loans.
Refinancing continued to dominate high grade lending as top
companies were able to secure better terms as bank liquidity and
appetite improved. Nearly $85 billion of refinancing loans were
raised in the first quarter, although the number of deals
completed decreased to 75 from 109 in the same period.
The largest refinancing of the first quarter was Italian
utility Enel's 9.4 billion euro ($12.01 billion)forward start
loan which will replace an existing 10 billion euro syndicated
loan when it matures in April 2015.
French power and transport group Alstom also
completed a 9 billion euro refinancing of a guarantee facility.
Only $26.6 billion of investment grade M&A loans were
completed in the first quarter as acquisition activity remained
low despite relatively benign markets and a robust corporate
A $14.2 billion loan backing Russian oil major Rosneft's
acquisition of a 50 percent stake in TNK-BP from the
AAR consortium was the largest syndicated loan of the first
The loan followed an earlier $16.8 billion loan backing the
acquisition of BP's half of TNK-BP, which was signed at the end
Loan pricing came under increasing pressure as competition
re-emerged between banks, which allowed borrowers to access
better terms, especially in the European power house economy of
Average undrawn margins for single A rated companies fell
11.25 basis points (bps) to 28.75 bps in the first quarter while
pricing for BBB-rated companies saw a 16.11 bps reduction to 80
bps from the 96.11 bps seen in the 4Q12.
First quarter leveraged loan volume of $30.2 billion was 19
percent lower than a year earlier due to a lack of new buyout
activity, which at $3.6 billion was 47 percent lower than the
same period of 2012.
Leveraged loan volume was outstripped by a more active
high-yield bond market where first quarter issuance hit an all
time high of $45.5 billion.
Most leveraged lending was attributed to refinancings,
repricings and amendments and extensions of existing debt.
The largest leveraged loan of the first quarter was the $4.9
billion refinancing of British broadcast transmission provider
Arqiva, which refinanced its 2007 loans.
The refinancing included senior loan facilities provided by
a club of 20 lenders and a bridge loan to bond issues.
The second largest leveraged loan was the $3.4 billion
refinancing, amendment and extension of Danish outsourcing firm
ISS's debt pile to pave the way for a potential IPO. ISS raised
new senior debt to refinance an expensive second lien loan and
extended the maturity of existing debt.
Companies took advantage of positive market conditions and
good liquidity to reprice existing loans as new buyouts remained
in short supply.
Energy analysis group Wood Mackenzie and UK frozen foods
retailer Iceland Foods repriced 2012 buyout loans to obtain more
favourable terms and cut interest margins on the debt.
Other notable leveraged loans of the first quarter included
the $4.7 billion debt financing backing Liberty Global's
acquisition of Virgin Media which included a $1.9 billion
sterling tranche as well as buyout loans for credits including
Dutch medical supplier Mediq and British discount retailer B&M.
The pipeline of new buyouts for the second quarter is
looking strong and will require around $20.8 billion of new
buyout financing financing if all the auctions succeed.
This level of activity would surpass the $17.25 billion of
new buyout financing which was completed in 2012.
"This quarter has seen a lot of investor demand and sponsors
wanting to do M&A. Not much has happened yet, but it should come
in 2Q. In the meantime, sponsors have taken advantage of strong
credit markets to refinance, reprice and amend and extend their
debt," a leveraged loan banker said.
French banks returned to the top of the EMEA syndicated loan
bookrunner table in the first quarter of 2013, led by Credit
Agricole CIB with a $11.6 billion share of the market
from 21 deals.
BNP Paribas was second with a $10.3 billion market
share from 37 deals and Societe Generale was third
with a $9.3 billion market share from 27 deals.
($1 = 0.7824 euros)
(Editing Tessa Walsh)