Leveraged Loan & High-Yield Bond Markets
Per 31 Dec-24
Leveraged Loan Markets
European sponsored leveraged loan market continues its growth trajectory compared to the previous year, also recovering in 4Q24 from the drop in 3Q24
European quarterly sponsored loan volume and deal count (per Dec-24)
The European sponsored leveraged loan market rebounded significantly in 4Q2024 from the 3Q2024 decline…
European sponsored leveraged loan volume increased to €20.6bn in 4Q24 (vs. Q3: €10.1bn). This rebound reflects increased volumes, with the number of deals only slightly rising to 38 in 4Q24 (vs. Q3: 34), indicating larger deals, driven by declining interest rates and some pick-up in M&A and LBO deals.
...with new issuances in 4Q24 at a slightly lower Yield-to-Maturity than previous quarters...
Yield-to-maturity continued to slightly decline in 4Q2024, falling to 7.6% (down from 7.7% in Q3). The average B-rated spread increased to 402 bps in Q4 2024. The markets showed some stabilization in the YTM during the quarter, with rates not falling much further.
Average quarterly new issue spreads and YTM for single-B TLBs (per Dec-24)
Annual pro forma debt/EBITDA ratios (per Dec-24)
... and leverage ratios 2024 showing a slight uptick compared to 2023.
Despite the increase in loan volumes, leverage ratios were relatively stable, with Debt/EBITDA ratio at 5.1x in 2024.
Source: Pitchbook, LCD
High-Yield Bond Markets
European high yield bond issuance volumes recover, while spreads continue to tighten
European quarterly high-yield bond volume and deal count (per Dec-24)
After a moderate recovery in 2023, European high-yield bond issuance gained momentum in 1Q24, reaching its peak in 2Q24. This growth was driven by improving market conditions, despite still elevated interest rates. Falling issuance levels observed in 3Q24 were followed by a slight increase in 4Q24 as European high-yield bonds with a volume of €23.7bn were issued.
Average spreads in basis points (per Dec-24)
Average spreads for B-rated bonds decreased to 357 bps (down from 405 bps in Q3), reflecting improved investor demand. BB-rated spreads fell to 208 bps (Dec-24). This trend underscores a cautious yet positive sentiment toward riskier investments in the European bond market, as investors balance the search for yield with ongoing economic uncertainties.
European yearly high-yield use of proceeds (in % of total volume, per Dec-24)
In the fourth quarter of 2024, the European high-yield bond market maintained a strong focus on refinancing, which made up 47.4% of the total issuance. M&A and LBO activities accounted for 34.9% of issuance, reflecting a modest recovery in deal flow as market conditions began to stabilize. Meanwhile, recapitalization efforts comprised 16.4% of issuance, marking a decrease from the previous quarter as companies adapted their capital structures to ongoing economic challenges.
Source: Pitchbook, LCD
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