The Report contains European leveraged finance market trends for the fourth quarter of 2022, which includes issuance and credit performance figures for the high yield and leveraged loan markets.
- European leveraged finance issuance accumulated €37.4 billion in proceeds in 4Q'22, a 31.4% quarter-on-quarter (QoQ) decrease and a 57.8% year-on-year (YoY) decrease.
- High yield bond issuance totalled €10.7 billion on 28 deals in 4Q'22, a 114% increase from €5.0 billion in 3Q’22 but a 73.0% decrease from €39.8 billion in 4Q’21.
- The proportion of USD-denominated issuance decreased to 5.2% of all issuances in 4Q'22, down from 9.3% in 3Q’22 and from 28.8% in 4Q’21.
- The leading use of proceeds for high yield bond issuance in 4Q'22 was general corporate purposes, at €6.5 billion, which was higher than €3.1 billion in 3Q’21 but lower than €13.2 billion in 4Q’21.
- Preliminary data for 1Q’23 indicates that high yield bond issuance continues below its long-term average, accumulating €10 billion in proceeds in the first two months of 2023 (€16 billion in the first two months of 2022, €28 billion in 2021, and €29 billion in 2020).
- Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €26.6 billion in 4Q'22, down 46.1% from €49.4 billion in 3Q’22 and down 45.5% from €48.8 billion in 4Q’21
- 63.2% of deals financed in 4Q'22 were issued for refinancing and/or repayment of debt, up from 22.5% in 3Q’22, and from 25.5% in 4Q’21. General Corporate Purposes was the second largest use of proceeds in 4Q'22 with €3.6 billion, followed by Acquisitions with €2.7 billion.
- Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 2.2% in December 2022, an increase from 1.8% in December 2021. Moody's reported the speculative-grade default rate at 2.8% in December 2022, up from 1.2% in December 2021.
- There were 7 bond defaults reported in the 4Q’22 by Standard and Poor’s and Moody’s. The reasons were distressed exchange, missed principal payments and bankruptcy.
- Fitch reported an increase in European Leveraged Loan default rates (by value) to 0.6% in December 2022 from 0.4% in June 2022
- According to Reorg, nearly all the European leveraged loan deals examined in 2022 were covenant-lite