EMEA syndicated lending dips to US$984bn in 2019

LONDON, Jan 6 (LPC) - Syndicated lending in Europe, the Middle East and Africa in 2019 totalled US$984.5bn in 2019, down 6% on 2018 volume, as global risks such as US/China trade wars, slowing economies and Brexit weighed on loan market activity, according to Refinitiv LPC data.

Despite these uncertainties, market liquidity and confidence remained high and volume was 10% higher than in 2017 as borrowers were still able to tap the loan market on attractive terms. The number of deals completed in the year remained stable at 1,648.

“It’s not been a headline grabbing sort of year, but we’ve signed just as many deals,” a senior banker said.

Helping to maintain EMEA loan volumes, green and sustainable loans came into their own in 2019 as growing numbers of corporate borrowers tapped into interest from banks and debt investors to incorporate sustainability criteria into their credit facilities.

Refinancing, traditionally the main driver of loan market activity, made up around 66% of market volume in 2019 with a total of US$646bn, slightly down on the US$654bn seen in 2018.

Global diversified natural resource company Glencore made its annual pilgrimage to the loan market in March for a US$14.425bn refinancing and extension of its existing revolving credit facilities (RCFs).

German car maker Volkswagen completed a €10bn (US$11.13bn)RCF in December, doubling the size of its existing €5bn core credit facility.

Also in December, Royal Dutch Shell refinanced its loans through an innovative US$10bn RCF with Secured Overnight Financing Rate (SOFR) based pricing and with margins and fees linked to its carbon footprint targets.

The financing was a major step towards the loan market’s transition from Libor-based pricing to risk free rates (RFR) ahead of the cessation of Libor at the end of 2021.

Loans backing acquisitions fell nearly 18% to US$206bn in 2019 as companies continued to bypass the loan market for all-share deals, asset swaps or funding acquisitions through existing cash and credit facilities.

With the bond and Schuldschein markets providing a ready route to refinancing bridge loans on highly attractive terms, companies took advantage to place M&A bridge loans in 2019.

French luxury goods firm LVMH closed US$17bn-equivalent of loans in November backing its recommended US$16.2bn acquisition of US jewellery maker Tiffany.

In September, London Stock Exchange closed a US$13.2bn-equivalent bridge loan backing its acquisition of data and analytics company Refinitiv, the parent company of LPC.

Other sizable M&A deals in 2019 for French IT services group Capgemini, software company Dassault, and eyewear maker EssilorLuxottica; and for German chip maker Infineon Technologies, drugs and lab supplies company Merck KgaA and auto parts supplier ZF Friedrichshafen, have also followed the pattern of large bridge loans to capital market take-out.

Away from the jumbo transactions, an increased number of smaller M&A deals has also kept loan desks busy in 2019.

“There have been more mid-market type deals this year, which are well priced and don’t have big lender groups, meaning relationship banks are getting a bigger share of the underwriting,” the banker said.

In Central and Eastern Europe, the Middle East and Africa, syndicated loan volume fell 18.45% to US$150.23bn from US$184.2bn in 2018 as regional instability and continued economic sanctions in Russia combined to hit activity.

The largest loan agreed in CEEMEA in 2019 was the US$10bn bridge loan for Saudi Arabia’s Public Investment Fund. The facility, signed in October, will be repaid following completion of the agreed US$69.1bn sale of PIF’s 70% stake in SABIC to Saudi Aramco.


Despite activity in the European leveraged loan market picking up in the second half of the year, 2019 volume dropped to US$192.43bn, the lowest level since 2016.

Thanks to a number of public-to-private deals and repricings, volume in the fourth quarter rose 67% to US$50.16bn compared with the same quarter of 2018 when volatility hit the leveraged market.

Refinancings in 2019 totalled US$99.44bn, up from US$94.6bn in 2018 but still substantially down from US$161bn in 2017, keeping overall volume lower. M&A activity fell slightly in 2019, reaching US$64.16bn from US$65.3bn in 2018.

Loans continued to be favoured by private equity sponsors seeking additional flexibility and cheaper pricing and volume was higher than high-yield bond issuance, which was US$97.47bn in 2019.

Public-to-private deals featured heavily in 2019, with a number of jumbo deals hitting the market in the second half.

They included a £2.193bn-equivalent loan backing Blackstone and Lego’s founding family’s acquisition of UK theme park operator Merlin Entertainments and a £997m-equivalent loan backing the acquisition of British car auctioneer BCA Marketplace.

“P2P (public-to-private) deals dominated the year,” said a second senior banker.

Looking ahead, around €14bn of leveraged loans are set to hit Europe’s loan market in the first quarter of 2020, promising a solid start to the year as the pipeline of new issuance builds.

They include a €3bn-equivalent financing backing a buyout of UK defence and aerospace group Cobham, €690m of leveraged loans backing Platinum Equity’s acquisition of European biscuits manufacturer Biscuit International and around US$2bn financing backing Thoma Bravo’s acquisition of UK cyber security company Sophos.

“It’s a good line-up of deals, and investors’ demand will continue to be robust,” said another banker.

BNP Paribas topped the EMEA syndicated loan bookrunner league table at year-end with a US$59.28bn market share and 253 deals. Credit Agricole CIB claimed second place with US$45.86bn and 233 deals, while UniCredit was third with a US$35.48bn market share and 175 deals.

($1 = 0.8986 euros)