* 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
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
"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
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
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)