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European leveraged debt fights back

Despite a tough year, leveraged debt is facing up to challenges with renewed resilience

For every dire prediction we read about 2017, we can find a corresponding optimistic forecast based on the same facts. Brexit, US politics, upcoming European elections, rising interest rates, impending ECB regulations, international relations, you name it, numerous factors will determine the landscape for the year.

Perhaps the main lesson to be learned from 2016 is that, while financial markets remain cautionary, they now respond to volatility much more quickly than in the past, as evidenced by the severe downturn in activity in the early part of the year followed by a post-Brexit rebound (even though the actual result was unexpected) and now guarded optimism about the impact of the US election results as we enter the new year.

So, for the optimists, 2017 is looking good. Expected increases in M&A activity, looming maturities and market growth in certain sectors and regions bode well for an active market. For the pessimists, flip it around, uncertain market valuations, rising interest rates and economic uncertainty garner the opposite expectation.

One safe bet: our original predictions on the convergence of international markets are proving accurate, and this trend will continue. We expect 2017 to be a year where high yield bonds and covenant light "term loan B" loans battle for market prominence. As the market continues to expand horizontally, we expect the momentum for financial restructurings, demand for alternative capital and direct lending solutions, and emerging market capital requirements, to continue to provide opportunities for new and innovative approaches to capital-raising in the European markets. Market participants showing versatility and the ability to innovate quickly across a broad range of products, markets and platforms should be well positioned for an active year, come what may.


Please follow the links below to read articles in our report, or read the full the report here.


2016 in review

Refinancing rules debt as issuers look to take advantage of circumstances
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The leveraged debt boom post-Brexit

Covenant lite deals becoming the new normal in Europe
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Infographic: European leveraged debt in focus

Selected European leveraged loan and high yield bond markets by volume, top five most active sectors—high yield bonds and top five most active sectors—leveraged loans
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The future of European leveraged debt

While fears of another downturn loom, the European financial markets have innovated, evolved and grown
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European leveraged debt fights back

White & Case partners Lee Cullinane and Rob Mathews discuss how European high yield and leveraged loan markets have changed over the past 12 months and what lies ahead for 2017.


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