White & Case: European Leveraged Finance Markets Weather COVID-19 Storm with Robust Outlook for 2021

  • European leveraged loan and high yield issuance up 11% and 10% respectively, confirming the market's long term resilience.
  • Lenders will turn their attention to high quality credits or COVID-19 growth areas technology and healthcare, with hopes for improved deal flow in 2021.
  • However, sectors including entertainment and leisure, retail and aviation will struggle to secure financing.
Press Release
2 min read

Global law firm White & Case LLP has revealed in a new report – European leveraged finance: COVID-19 and the flight to quality – that leveraged loan and high yield issuance in Europe increased by 11 percent to €227.1 billion and ten percent to €100.5 billion, respectively, in 2020.

The growth compared with 2019 was achieved despite a drop to €12 billion in March 2020 as lockdowns took hold and the leveraged finance markets ground almost to a halt, and the continued challenges through the rest of the year posed by COVID-19. 

Going into 2021, the report notes that many of the elements that characterised leveraged finance issuance during COVID-19 are likely to remain a feature of the market: in the short-term, lenders will continue leaning towards high quality credits or those in sectors that have seen pandemic-linked opportunities for growth, such as technology or healthcare. While further waves of COVID-19 pose ongoing challenges for the market, a series of approved vaccines with ongoing roll-outs, low interest rates, extensive quantitative easing and a change in administration in the US have raised hopes for improved dealflow in 2021.

More transactions are likely to emerge, for example in M&A, with a clearer view of future earnings and pricing. The range of dealmakers and investment strategies is also likely to expand, from financial sponsors in search of new opportunities to activist investors driving deal activity. 

However, sectors hammered by the first wave – including entertainment and leisure, hospitality, retail, oil and gas and aviation – will face challenges as they continue to adjust to the difficult operating environment. 

Chapters in the report, which can be read in full here, include: 

  • Living dangerously: How has European leveraged finance fared in the pandemic?
  • Five trends driving post-COVID-19 documentation
  • Buyout rebound reflects optimistic outlook
  • Market reset could trigger restructurings in 2021
  • European CLOs: A mere flesh wound
  • Sector split: The very different impact of COVID-19
  • Leveraged finance: The United States versus Europe
  • European leveraged debt in focus
  • What is shaping sponsor debt decisions for 2021?

A number of White & Case partners have contributed to the report, including capital markets partners Jill Concannon, James Greene, Monica Holden, Chris McGarry, Gilles Teerlinck and Andrew Weisberg; debt finance partners Jeremy Duffy, Martin Forbes, Colin Harley, Eric Leicht, Richard Lloyd, Shane McDonald and Ben Wilkinson; M&A partner Patrick Sarch; and restructuring partners Ben Davies and Morvyn Radlow. 

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