Leveraged Loan & High-Yield Bond Markets
Per Jun 25
Leveraged Loan Markets
European sponsored leveraged loan market remains elevated in 2Q25 despite cooling down from its 1Q25 surge, as spreads tighten and leverage increases
European quarterly sponsored loan volume and deal count (per Jun-25)
In 1H25, The European sponsored leveraged loan market rebounded significantly from the 2023 low…
Despite elevated activity, European sponsored leveraged loan volume decreased to €23.0 bn in 2Q25 vs. 1Q25 (€33.9bn). The number of deals declined to 64 in 2Q25 (vs. 1Q25: 69), as sentiment weakened and issuers adopted a more cautious stance amid persistent macroeconomic uncertainty.
...with new issuances in 2Q25 at lower yield-to-maturity than previous quarters...
Yield-to-maturity continued to decline in 2Q25, falling to 6.2% (down from 6.5% in 1Q25) as inflation moved closer to central banks’ 2% target. The average B-rated spread increased to 379 bps in 2Q25 (vs. 360 bps in 1Q25).
Average quarterly new issue spreads and YTM for single-B TLBs (per Jun-25)
Annual pro forma debt/EBITDA ratios (per Jun-25)
...and leverage ratios 2Q25 continue to increase slightly compared to 2024.
Despite some cooling in deal activity, leverage ratios remain elevated, with Debt/EBITDA ratio at 5.3x YTD Jun-25.
Source: Pitchbook, LCD
High-Yield Bond Markets
European high-yield bond issuance volumes fluctuate, while spreads continue to tighten
European quarterly high-yield bond volume and deal count (per Jun-25)
After a moderate start in 1Q25 (€19.2bn), European high-yield bond issuance more than doubled to €44.8bn in 2Q25 supported by investors seeking to reduce USD exposure amid a complex macro environment and ECB rate cuts.
Average spreads in basis points (per Jun-25)
Average spreads for B-rated bonds spiked at the beginning of 2Q25 but ended 2Q25 at 384 bps (385 bps at the end of 1Q25). BB-rated spreads slightly declined to 217 bps (vs. 1Q25: 223 bps). Movement in 2Q25 in line with development of government bonds, as investors balance the search for yield with ongoing economic uncertainties.
European yearly high-yield use of proceeds (in % of total volume, per Jun-25)
YTD Jun-25, the European high-yield bond market maintained a strong focus on refinancing, which made up 51.4% of the total issuance volume. M&A and LBO activities accounted for 22.8% of issuance volume, reflecting the subdued M&A market activity. Meanwhile, recapitalization efforts comprised 15.0% of issuance volume.
Source: Pitchbook, LCD
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