Leveraged finance review: Introduction: A new imbalance

Governments’ determined efforts to pump money into the financial system have created lots of liquidity for lending – but the impact of the crash is still being felt on the demand side

For the leveraged lending market, 2013 got off to an auspicious start, particularly in light of the challenges of the last few years: the huge financing packages attached to Silver Lake’s bid for Dell and to 3G/ Warren Buffett’s Heinz deal provided ample evidence of the liquidity available in the debt markets. With central banks pumping more and more cheap money into the system, the banks have money to lend, while the rush of capital into bonds and credit funds in recent times has also boosted supply. Suddenly, the market was alive with speculation about big deals on both sides of the Atlantic.

So far, however, the hoped-for M&A deluge has not materialised. Four months into the year, US leveraged loans volumes are on course to surpass last year’s total, but not by much – and in Europe, volumes are actually lagging behind 2012 levels. Lenders may have re-found their mojo, at least to some extent. But for buyers and sellers, there’s still too much nervousness about current market conditions – not to mention future economic prospects – for the floodgates to open. So the supply/demand imbalance has tilted in the opposite direction.