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Leveraged loan volumes down in Q2

The latest report from Marlborough Partners shows a nearly 30% drop in the issuance of leveraged loans in the UK and a 4% decline across Europe in the run up to Brexit.

Leveraged loan volumes across Europe dropped in the run up Brexit, according to the latest quarterly report from financial advisory firm Marlborough Partners.

Total European leveraged loan volumes dropped by 4 percent in the second quarter of 2016, valued at €16.4 billion, compared with the same period last year, as first reported by Private Equity International 's sister publication, Private Debt Investor.

The decline was more pronounced in the UK as loan volumes dropped by almost 30 percent to €2.1 billion, significantly down on the €2.9 billion figure from the same period last year. In the previous quarter, UK leveraged loan volume was about €2.5 billion, which demonstrates that as it got closer to Brexit the market became more cautious.

The decline in UK issuance was attributed to “lower non-sponsored volumes and refinancing activity as transactions were withheld in anticipation of the EU referendum”.

On a positive note for the European market, collateralised loan obligation issuance for the second quarter surpassed last year's total, reaching €4.6 billion, a small improvement on the €4.5 billion from 2015. One effect, the report noted, is that it is driving the secondary market higher.

But on the aftermath of Brexit, the report remained buoyant. Lenders and sponsors are understood to be keen to complete transactions even in an environment where dealflow has slowed down. However, the report found that a number of firms based outside of the UK are continuing to adopt a “wait and see” attitude as the UK's future position outside of the European Union remains unclear.