Devil is in the (fundamental) details

Devil is in the (fundamental) details

Published: Feb. 15, 2022

European Leveraged Loan Index (ELLI) has registered a positive YTD performance equal to +0.20% as of 10/02/2022.

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Even if inflation fears continue to affect financial markets, demand for loans remains far stronger than supply and has resulted in reverse flexes and better terms for the solid names which are currently issuing in the primary market, while other issuances struggled due to the weaker credit.

Smaller issuances are becoming one of the toughest corners of the liquid syndicated loan market as the core investor base focuses on bigger trades from borrowers with a clear and solid track record. This means smaller issuances have to offer an illiquidity premium, especially if the transactions are backed by a midmarket sponsor without the profile and relationships of a large cap private equity group. Moreover, investors are becoming increasingly choosy when it comes to new issuances’ debt leverage, demanding solid fundamentals and lower ratios.

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Source: Leveraged Commentary & Data (LCD).