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Abu Dhabi, UAESunday 23 September 2018

Leveraged finance issuance to maintain momentum in September

Moody’s says loans have outpaced issuance of high-yield bonds

The issuance of leveraged finance in Europe, Middle East and Africa will maintain its pace in September as markets in the region remained active in July. Tasneem Alsultan/Bloomberg
The issuance of leveraged finance in Europe, Middle East and Africa will maintain its pace in September as markets in the region remained active in July. Tasneem Alsultan/Bloomberg

The issuance of leveraged fin­ance in Europe, the Middle East and Africa (Emea) will maintain its pace this month as markets in the region remained active in July on the back of solid momentum gathered during the first six months of this year.

The issuance was, as expected, on the slower side in August during the summer break in the region, which also includes some of the top oil-producing countries such as Saudi Arabia and the UAE, Moody’s Investors Service said in a update to the market released on Tuesday.

Combined issuance in July and August increased by 50 per cent, raising up to US$26.2 billion, compared with $17.5bn in the same period of 2016, Moody’s said.

Leveraged loan volumes also outpaced high-yield bonds with $13.9bn and $12.4bn, respectively for the same period. Loans also accounted for 78 per cent of the issuance in August with a more pronounced slowdown for bonds in the month, the rating agency added.

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“While market activity levels remain high, potential monetary tightening on the back of reduced European Central Bank (ECB) asset purchases or rising US and UK interest rates could reduce demand and issuance volumes,” Peter Firth, an associate managing director at Moody’s said in the report.

“Bond spread volatility, which has been falling since the ECB’s decision to start asset purchases in March 2016, could kick up towards the end of the year.”The current leveraged bond and loan issuance volume since the beginning of this year stands at $170bn, 27 per cent higher than full-year 2016 figures, with leveraged loans making up two-thirds of the issuance so far this year, according to the rating agency.

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