* Almost 5 bln euros of loans to launch early September
* 2014 loan volume on track to surpass last year's total
* More sponsor acquisition activity expected - Fitch
By Claire Ruckin
LONDON, Aug 22 After a two-week lull in Europe's leveraged loan market, bankers are gearing up for a busy remainder of 2014, which is expected to see volumes surpass last year's total and continue the year-on-year increases seen since 2008.
Leveraged loan volume in 2014 is on track to exceed last year's total of $191 billion, having reached $127 billion to-date, according to Thomson Reuters LPC data.
A busy July saw $23.5 billion of leveraged loans get over the line, adding to a first-half total of $103.5 billion - the highest half-year volume since the $223 billion seen in the first six months of 2007.
September will see a number of launches, with almost 5 billion euros (6.62 billion US dollar) of loans already in the syndication pipeline, as a result of event-driven activity and volume is likely to be even higher when taking into account potential refinancings.
"Capital markets desks are talking positively about good visibility for a good loan pipeline. There should be some new deals as well as refinancings, add-ons and dividend recapitalisations. People are talking constructively about the leveraged loan market and hopefully these deals should materialise in September," a leveraged loan investor said.
A second investor said: "There is an expectation that a number of desks have transactions ready to come through. A flood of deals should hit the market once it reopens in September."
There is expected to be more sponsor acquisition activity in the coming months due to a correction in enterprise values from recent equity market performance, according to a new report by Fitch Ratings.
Europe has been an attractive market for borrowers this year, especially against the backdrop of a softening in the US loan market, as cash-rich investors competed to invest in deals by accepting tighter pricing, more aggressive leverage levels and covenant-lite loans.
A flood of deals to the European leveraged loan market in July allowed investors to cherry-pick the best deals and introduced pricing differentiation, which enabled most of the more difficult credits to clear.
Despite the pre-summer rush, investors still have appetite to invest, with a number of large repayments expected from deals including pharma-company Boots as well new money from new credit funds, managed accounts and CLOs warehousing.
"A big volume of deals got taken down in July and people have felt some real, decent depth to the bid in both Europe's primary and secondary loan markets. This has given people a lot of comfort that this market is quite robust and if a decent spate of volume comes, there is appetite to take that down," the first investor said.
A leveraged loan banker added: "The market didn't run out of money in July and the volume of money coming to the market has not diminished. A steady flow of repayments and new money being raised hasn't stopped the need to keep feeding the beast."
Deals due to be launched for syndication in September include an 845 million euro loan backing EQT's buyout of Dutch information provider Bureau Van Dijk Electronic Publishing; a 600 million euro loan backing KKR's ,KKR.N> offer to take full control of German listed cutlery and coffee-machine maker WMF ; and 525 million euros of loans for Global Resorts' acquisition of resort operator Club Mediterranee.
In addition, bankers held a call with lenders on a loan financing backing Advent's buyout of Belgian aluminium systems manufacturer Corialis, which is expected to total about 415 million euros and be launched for syndication in September. Early-bird investors are also considering an all-senior loan for Bestway Group's acquisition of Britain's Co-operative Group's pharmacy business, which totals 725 million pounds (1.20 billion US dollar).
A 1.6 billion euro loan for German plastics maker Styrolution will also return to the market in September, having been pulled in August amid a summer slowdown.
Bankers are also preparing debt financings for potential sales that are in auction phase, including about 2.8 billion euros of debt to back a potential sale of SIG Combibloc Group, the world's second-largest maker of drinks cartons. Debt financings of up to 720 million euros to back a potential sale of crop protection company Cheminova are also being prepared, with final bids for the business due in the first week of September.
There is also the possibility that Iliad could improve its offer for Deutsche Telekom's mobile business in the US. If the sale were to take place, it would be expected to result in a leveraged financing of more than $13 billion, which would include a large portion of cross-border dual-currency loans, as well as bonds.
Although it is clear that investors have cash to spend, there is less visibility on what pricing expectations are. Investors are likely to have more negotiating leverage on new primary issues as a result of recent market volatility, according to the Fitch report. (1 US dollar = 0.7551 euro) (1 US dollar = 0.6035 British pound) (Editing by Christopher Mangham)