20
Prepared in partnership with 2011 Q1 European High Yield & Leveraged Loan Report
Prepared in partnership with 2011 Q1
European High Yield & Leveraged Loan Report
Market Highlights and Commentary.......................1 1. Leveraged Finance Overview..............................3
1.1. European Leveraged Issuance by Type .............................3 1.2. European Leveraged Issuance by Percentage....................3 1.3. European Leveraged Issuance Average Deal Size.............3 1.4. Bank Credit Standards.......................................................3 1.5. Factors Affecting Bank Credit Standards ..........................3 1.6. Loan Demand ....................................................................3 1.7. Factors Affecting Loan Demand .......................................4 1.8. Global Comparison – High Yield Issuance .......................4
2. Issuance – Leveraged Loans ..............................5 2.1. European Leveraged Loan Issuance By Loan Type ..........5 2.2. European Leveraged Loan Issuance by Industry Sector ....5 2.3. Forward Pipeline of Leveraged Loan Market....................5 2.4. S&P ELLI Total Institutional Loans Outstanding .............5 2.5. S&P ELLI Ratings Diversification....................................5 2.6. European Leveraged Loan Ratios......................................5 2.7. Institutional and Pro Rata Spreads.....................................6 2.8. Mezzanine Spread .............................................................6
3. Issuance – High Yield Bonds Overview .............7 3.1. European HY Bond Issuance, Developed and Emerging
Market ..............................................................................7 3.2. European HY Bond Issuance, Sponsored vs. Corporate....7 3.3. European Corporate Bonds ex Banks and Financials,
Outstanding ......................................................................7 3.4. European Corporate Bonds ex Banks and Financials,
Outstanding (EUR-Denominated Securities Only)...........7 3.5. European Corporate Bonds ex Banks and Financials,
Average Deal Size ............................................................7 3.6. European Corporate Bonds ex Banks and Financials,
Average Deal Size ............................................................7 3.7. European HY Use of Proceeds ..........................................8 3.8. European HY Issuance, Senior Secured Share ..................8
4. Issuance – European Developed Market High Yield Bonds ..............................................................8
4.1. European Developed Market HY Bond Issuance ..............8 4.2. European Developed Market HY Issuance by Currency ...8 4.3. European Developed Market HY Issuance by Industry.....8 4.4. European Developed Market HY Issuance by Country of
Risk ..................................................................................8 4.5. European Developed Market HY Issuance, Fixed vs.
Floating ............................................................................9 4.6. European Developed Market HY Issuance, Sponsored vs.
Corporate..........................................................................9 4.7. European Developed Market HY Bond Issuance ..............9
5. Issuance – European Emerging Market High Yield Bonds........................................................................11
5.1. European Emerging Market HY Bond Issuance................11 5.2. European Emerging Market HY Bond Issuance by
Currency...........................................................................11 5.3. European Emerging Market HY Issuance by Industry ......11 5.4. European Emerging Market HY Issuance by Country of
Risk ..................................................................................11 5.5. European Emerging Market HY Issuance, Fixed vs.
Floating ............................................................................11 5.6. European Emerging Market HY Issuance, Sponsored vs.
Corporate..........................................................................11 5.7. Emerging Market HY Bond Issuance................................12
6. Credit Quality ....................................................... 13 6.1. European HY Default Rate ...............................................13 6.2. European Loan Default Rate .............................................13 6.3. Developed Europe Issuer Rating Actions..........................13 6.4. Emerging Europe Issuer Rating Actions ...........................13 6.5. Developed European Industry Rating Actions by $
Amount ............................................................................13 6.6. Emerging European Industry Rating Actions by $
Amount ............................................................................13
7. Relative Value ...................................................... 14 7.1. European HY Bonds, Cash vs. Synthetic ..........................14 7.2. European Leveraged Loans, Cash vs. Synthetic................14
8. Total Return.......................................................... 14 8.1. European HY Bond Total Return......................................14 8.2. European Leveraged Loan Total Return ...........................14 8.3. Asset Class Total Return...................................................14
Annex........................................................................ 15 Disclaimer ................................................................ 17
1 AFME High Yield Division
Q1 2011
European Leveraged Finance, First Quarter 2011Highlights and Market Environment Highlights • European leveraged finance issuance (leveraged loans
and high yield bonds) totalled €38.9 billion in the first quarter of 2011 (Q1 2011), an increase of 79.4% and 24.8% from Q4 2010 (€21.6 billion) and Q1 2010 (€31.2 billion). Proceeds were mostly used to refinance and/or restructure debt, although LBO/MBO activity, especially secondary buyouts, increased in the loan space.
• Market share of high yield bond issuance declined slightly to 54.1% in Q1 2011, down from a 68.3% share in Q4 2010.The use of senior secured structures continues to remain firmly in place.
Market and Economic Environment • The European sovereign debt crisis continued in the
first quarter of Q1 2011, as Ireland, Portugal, and Spain were all downgraded by the credit rating agencies in quick succession. Shortly after the end of Q1, Portugal requested aid from the EU. Moody’s noted that “weak sovereigns and constrained banking sectors will impair the prospects of all European corporates”; although the extent of impairment varied considerably across industries.1
• According to the April European Central Bank (ECB) bank lending survey, banks reported, on net, a tightening of lending standards in Q1 2011. In particular, the vulnerability of regional banks to the sovereign debt crisis contributed to tighter lending. Notably, tightening of standards was more evident among large enterprises than for small and medium enterprises (SMEs). However, standards for short-term loans eased due to near-term default risk of the loans remaining low. The primary factors that affected bank lending standards were access to market financing and bank liquidity positions. Conversely, competition from banks and financing from markets contributed to easing of some of the standards.
• The April bank lending survey is the third consecutive survey in which the demand for loans has increased, primarily due to working capital needs, debt restructuring, and fixed investment.
Issuance Issuance: Leveraged Loans • Leveraged loan issuance, which includes first lien,
second lien, and mezzanine financing, totalled €17.9 billion in Q1 2011. Q1 2011 issuance was more than double the amount in Q4 2010, but 13% below the
1 Moody’s. “European Corporates: Improved Credit Outlook But Sovereign Weakness Continues to
Pose Risks,” 20 April 2011.
amount in Q1 2010 (€20.5 billion). Notably, several deals were heavily oversubscribed. Some mezzanine and second liens emerged in first quarter; second lien loans have not been part of leveraged loan deals since 2008. According to S&P, the loan pipeline at the end of March was €0.5 billion, down from the €1.2 billion pipeline at the end of December.
• According to Dealogic data, the leading sector in leveraged loan issuance in Q1 2011 was the auto sector (€6.0 billion), followed by healthcare (€2.3 billion) and transportation (€2.1 billion). Auto issuance was up largely due to an amend-and-extend (“A&E”) transaction of Continental AG, consisting of €6.5 billion in loans and revolving facilities stemming from Continental AG’s acquisition of Siemens VDO Automotive AG in 2007.
• Due to the extension of Continental AG’s facilities, the share of A&E deals by dollar amount in Q1 2011 increased to 35.6% from 7.9% in Q4 2010. However, notably, the number of deals decreased.
• The share of deals aimed to refinance and/or repay debt was down slightly in Q1 2011 (45.2% by dollar amount) from Q4 2010 (86.7%). Conversely, LBO/MBO deals represented a 44.0% share of all deals in Q1 2011 by dollar amount. Out of the 22 LBO/MBO deals, however, 10 deals (26.7% by dollar amount) were in the form of secondary buyouts.
• The CLO market continued to remain quiet in Q1 2011. Outside of the SME space, only a single deal closed at the end of Q1 2011, a retained European leveraged loan CLO (€5.7 billion, Olimpo 2011-1) managed by Banco Santander. In the SME space, €15.7 billion SME CLOs were issued in Q1 2011, predominantly from Spain (€9.1 billion) and Portugal (€5.6 billion).
• Issuance in the U.S. CLO market showed signs of improvement; however, the implementation of the European CRD II Article 122a risk retention rules largely resulted in U.S. CLOs being marketed outside of Europe.
• CLO outstanding, including SME deals, in Europe increased slightly by the end of March, at €301.9 billion. In particular, SME outstanding decreased slightly (€165.8 billion from €166.2 billion end-December 2010), while non-SME CLOs increased slightly (€136.0 billion from €133.8 billion end-December 2010).
2 AFME High Yield Division
Q1 2011
0
50
100
150
200
250
300
350
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
€ Billions
Source: AFME / ESF, SIFMA
European CLO Outstanding2000:Q1 - 2011:Q1
SME
Non‐SME CLO
Issuance: High Yield Bonds • Primary issuance in Q1 2011, excluding emerging
market issuance, totalled €17.0 billion, with a total of 26 deals. Issuance was led by telecommunications (€4.5 billion), healthcare (€2.8 billion), and finance (€2.4 billion). From the European emerging market, high yield issuance totalled €4.0 billion, with a total of 11 deals, led by telecommunications (€1.2 billion) and finance (€1.1 billion).
• High yield issuance for refinancing and/or repayment of debt represented a share of 44.1% of all deals in Q1 2011, a slight decrease from Q4 2010 at 75.1%. Issuance for acquisition increased in Q1 2011 to a 24.6% share.
• Use of senior secured debt structures continues to remain firmly entrenched, particularly in developed Europe. Approximately 40% of all issuance was senior secured (46.4% in developed Europe, 11.0% in emerging Europe). As noted previously, ranking pari passu to senior secured bank debt should aid in recoveries, and ultimately returns, but senior secured bonds “did not imply equality.” Banks continued to remain in a relatively advantageous position, particularly through control in enforcement processes (e.g. bond standstill periods, intercreditor voting mechanics).2
Returns & Credit Quality • European high yield and leveraged loans returned, on
an absolute basis, 4.0% and 1.4% in Q1 2011. European high yield outperformed leveraged loans in Q1 2011, as well as U.S. high yield (3.9%).
• According to Standard and Poor’s (S&P), leveraged finance downgrades exceeded upgrades in both developed and emerging market Europe in Q1 2011.
• In non-emerging Europe, the bulk of downgrades stemmed from the downgrade of 21 banks, which in turn were caused by the downgrades of 5 sovereign nations. Like banks, utilities are also industries vulnerable to sovereign rating changes and were downgraded. The few upgrades were in the media &
2 Moodys. “European High-Yield Bonds: Pari Passu, But Not the Same,” November 10, 2010.
entertainment (four upgrades) and capital goods (three upgrades) sectors.
• Emerging market Europe, again, as in prior quarters, enjoyed a relatively quiet quarter, with three upgrades and four downgrades. A sovereign was upgraded (Belarus).
• High yield bond default rates continued to either decrease or remain unchanged, Moody’s and S&P had HY trailing 12-month default rates of 2.2% and 1.0% at the end of March, down from 2.3% and 1% end-December 2010. On the loan side, according to Moody’s, no European loan defaults were reported in Q1 2011.
• A single corporate default was reported by S&P for Europe (SAZKA a.s, a media and entertainment company from the Czech Republic). According to Moody’s, three distressed exchanges were reported for Q1 2011 among three Irish banks and building societies (Allied Irish Banks, EBS Building Society, and Irish Nationwide Building Society), although defaults were for lower tier subordinated bonds.
3 AFME High Yield Division
Q1 2011
1. Leveraged Finance Overview 1.1. European Leveraged Issuance by Type 1.2. European Leveraged Issuance by Percentage
0
50
100
150
200
250
300
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Sources: Dealogic, Thomson Reuters LPC
European Leveraged Issuance2003 - 2011:Q1
Leveraged Loans
Europe Developed HY
Europe EM HY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
Percentage
Sources: Dealogic, Thomson Reuters LPC
European Leveraged Issuance2003 - 2011:Q1
Leveraged Loans
Europe Developed HY
Europe EM HY
1.3. European Leveraged Issuance Average Deal Size 1.4. Bank Credit Standards1
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Sources: Dealogic, Thomson Reuters LPC
European Leveraged Issuance Average Size2003 - 2011:Q1
Leveraged Loans
Europe Developed HY
Europe EM HY
-20
-10
0
10
20
30
40
50
60
70
80
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11
Net Percentage
Source: ECB
Bank Credit StandardsApr. 2006 - Apr. 2011
SME
Large Enterprises
Overall
1.5. Factors Affecting Bank Credit Standards2 1.6. Loan Demand3
-8 -6 -4 -2 0 2 4 6 8 10 12
Competition from Banks
Market Financing
Competition from Non-Banks
Costs to Bank Capital Position
Risk on Collateral Demanded
Industry or Firm-Specific Outlook
Expectations Regarding Economic Activity
Bank Liquidity Position
Bank Access to Market Financing
Net Percentage
Source: ECB
Factors Affecting Bank Credit StandardsApr. 2011
Large Enterprises
SME
Overall
-50
-40
-30
-20
-10
0
10
20
30
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11
Net Percentage
Source: ECB
Loan DemandApr. 2006 - Apr. 2011
SME
Large Enterprises
Overall
1 A positive net percentage number signifies tightening bank credit; a negative net percentage number signifies easing credit. 2 A positive net percentage signifies the factor contributed to tightening credit standards; a negative net percentage signifies the factor contributed to easing credit standards. 3 A positive net percentage signifies increased demand; a negative net percentage signifies decreased demand.
4 AFME High Yield Division
Q1 2011
1.7. Factors Affecting Loan Demand4
-10 -5 0 5 10 15 20
Internal Financing
Debt Issuance
Loans from Non-Banks
M&A, Restruturing
Equity Issuance
Loans from Other Banks
Fixed Investment
Debt Restructuring
Inventories, Working Capital
Net Percentage
Source: ECB
Factors Affecting Loan DemandApr. 2011
1.8. Global Comparison – High Yield Issuance € Billions Prior
Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year 2009United States 49.3 49.3 39.6 28.0 45.7 48.6 162.0 92.4Asia Pacific 15.1 15.1 8.0 10.3 11.3 15.8 45.5 28.4Europe 25.3 25.3 14.5 13.5 16.9 20.7 65.6 39.2
20102011
4 A positive net percentage signifies a factor that contributed to higher demand; a negative net percentage signifies a factor that contributed to lower demand.
5 AFME High Yield Division
Q1 2011
2. Issuance – Leveraged Loans
2.1. European Leveraged Loan Issuance By Loan Type 2.2. European Leveraged Loan Issuance by Industry Sector
0
50
100
150
200
250
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic, Thomson Reuters LPC
Leveraged Loan Issuance by Loan Type2003 - 2011:Q1
Mezzanine
2nd Lien
1st Lien
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Utility & EnergyDining & Lodging
Leisure & RecreationOil & Gas
Consumer ProductsMetal & Steel
Professional ServicesFinance
ChemicalsRetail
TelecommunicationsFood & Beverage
TransportationHealthcareAuto/Truck
EUR Billions
Source: Dealogic
Leveraged Loan Issuance by Industry2011:Q1
2.3. Forward Pipeline of Leveraged Loan Market 2.4. S&P ELLI Total Institutional Loans Outstanding
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11
€ Billions
Source: Standard & Poor's LCD
Forward Pipeline of Leveraged Loan Market2009:Q1 - 2011:Q1
Europe
US
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
2003 2004 2005 2006 2007 2008 2009 2010 2011YTD
€ Billions
Source: Standard & Poor's LCD2010 is as of March 31, 2011.
S&P ELLI Total Institutional Loans Outstanding2005 - 2011:Q1
2.5. S&P ELLI Ratings Diversification 2.6. European Leveraged Loan Ratios5
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
2005 2006 2007 2008 2009 2010 2011YTD
Percentage
Source: Standard & Poor's LCDYTD is as of March 31, 2011.
S&P ELLI Ratings Diversification2005 - 2011:Q1
NR
Other
B
BB
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
Q1 Q3
2002 2003 2004 2005 2006 2007 2008 2009 2010
xEBITDA
Source: Fitch Ratings
European Leveraged Loan Ratios2002 - 2010:Q3 (YTD)
Senior Loans (including 2nd Lien)
All Leveraged Loans
5 Fitch data are as of 2010 Q1 and may be delayed.
6 AFME High Yield Division
Q1 2011
2.7. Institutional and Pro Rata Spreads 2.8. Mezzanine Spread
200
250
300
350
400
450
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11
Basis Points
Source: Dealogic, AFME, SIFMA
Institutional and Pro Rata SpreadsMar. 2006 - Mar. 2011
Institutional
Pro Rata
700
750
800
850
900
950
1000
1050
1100
1150
1200
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11
Basis Points
Source: Dealogic, AFME, SIFMA
Mezzanine SpreadMar. 2006 - Mar. 2011
Mezzanine
7 AFME High Yield Division
Q1 2011
3. Issuance – High Yield Bonds Overview 3.1. European HY Bond Issuance, Developed and Emerging Market
3.2. European HY Bond Issuance, Sponsored vs. Corporate
0
20
40
60
80
100
120
140
0
5
10
15
20
25
30
35
40
45
50
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 - Q1
# of Deals€ Billions
Sources: Dealogic, Thomson Reuters LPC
European HY Issuance, Developed and Emerging Markets2003 - 2011:Q1
Europe Emerging HY
Europe Developed HY
# of Deals (Right)
0%10%20%30%40%50%60%70%80%90%
100%
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
Percentage
Sources: Dealogic
European HY Issuance, Sponsored vs Corporate2003 - 2011:Q1
Europe CorporateEurope LBO
3.3. European Corporate Bonds ex Banks and Financials, Outstanding
3.4. European Corporate Bonds ex Banks and Financials, Outstanding (EUR-Denominated Securities Only)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Q1 Q2 Q3 Q4 Q1
2010 2011
€ Billions
Sources: Bloomberg, AFME, SIFMA
European Corporate Bonds ex Banks and Financials, Outstanding2010:Q1 - 2011:Q1
HY Only (excluding Non‐Rated)
Non‐Rated
IG Only
0
200
400
600
800
1000
1200
Q1 Q2 Q3 Q4 Q1
2010 2011
€ Billions
Sources: Bloomberg, AFME, SIFMA
European Corporate Bonds ex Banks and Financials, Outstanding (EUR-Denominated Securities Only)2010:Q1 - 2011:Q1
HY Only (excluding Non‐Rated)
Non‐Rated
IG Only
3.5. European Corporate Bonds ex Banks and Financials, Average Deal Size
3.6. European Corporate Bonds ex Banks and Financials, Average Deal Size
0
50
100
150
200
250
300
350
400
450
IG Only Non-Rated HY Only (excluding Non-Rated)
€ Millions
Sources: Bloomberg, AFME, SIFMA
European Corporate Bonds ex Banks and Financials Outstanding, Average Size2011:Q1
8 AFME High Yield Division
Q1 2011
3.7. European HY Use of Proceeds 3.8. European HY Issuance, Senior Secured Share
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 - Q1
Source: Dealogic, AFME/SIFMA
European HY Issuance By Use of Proceeds2003 - 2011:Q1
RestructuringRepay Debt/RefinancingLBO/MBOGeneral Corporate PurposesAcquisitions
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
5
10
15
20
25
30
35
40
45
50
2010 2011
2006 2007 2008 2009 2010 - Q1
€ Billions
Sources: Bloomberg, Dealogic
European HY Issuance, Senior Secured and Unsecured2006 - 2011:Q1
Other
Senior Unsecured
Senior Secured
% Senior Secured (right)
4. Issuance – European Developed Market High Yield Bonds
4.1. European Developed Market HY Bond Issuance 4.2. European Developed Market HY Issuance by Currency
0
10
20
30
40
50
60
70
80
90
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 - Q1
# of Deals€ Billions
Source: Dealogic
European Developed Market HY Bond Issuance2003 - 2011:Q1
Europe Developed HY
# of Deals (Right)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Developed Market HY Issuance by Currency2003 - 2011:Q1
Other
USD
GBP
EUR
4.3. European Developed Market HY Issuance by Industry 4.4. European Developed Market HY Issuance by Country of
Risk
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Dining & LodgingLeisure & Recreation
MachineryMetal & Steel
Oil & GasUtility & Energy
Construction/BuildingConsumer Products
TransportationInsurance
Forestry & PaperAuto/Truck
Food & BeverageFinance
HealthcareTelecommunications
€ Billions
Source: Dealogic
European Developed Market HY Issuance by Industry2011:Q1
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
Ireland
Luxembourg
Iceland
Switzerland
Belgium
Netherlands
France
Spain
United Kingdom
Italy
Germany
€ Billions
Source: Dealogic
European Developed Market HY Issuance by Country of Risk2011:Q1
9 AFME High Yield Division
Q1 2011
4.5. European Developed Market HY Issuance, Fixed vs. Floating
4.6. European Developed Market HY Issuance, Sponsored vs. Corporate
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Developed Market HY Bond Issuance, Fixed vs Floating2003 - 2011:Q1
FloatingFixed
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Developed Market HY Issuance, Sponsored vs Corporate2003 - 2011:Q1
Europe LBO
Europe Corporate
4.7. European Developed Market HY Bond Issuance
Issuer Industry Group Date CurrencyAmount (Millions) Coupon Moodys S&P Fitch
Cirsa Finance Luxembourg SA Leisure & Recreation 11/01/2011 EUR 280 8.750 B+Grifols Inc Healthcare 12/01/2011 USD 850 8.250 B3 BLabco SAS Healthcare 14/01/2011 EUR 500 8.500 B3 B+ BB‐Anglian Water (Osprey) Financing plc Utility & Energy 21/01/2011 GBP 416 7.000 Ba3 NR BB+ONO Finance II plc Telecommunications 21/01/2011 EUR 295 11.125 Caa2 CCC+ CCC
USD 167 10.875 Caa2 CCC+ CCCUPCB Finance II Ltd Telecommunications 21/01/2011 EUR 750 6.375 Ba3 B+Aguila 3 SA Transportation 24/01/2011 CHF 268 7.875 B2 B
USD 312 7.875 B2 BFresenius Medical Care AG & CO KGaA Healthcare 26/01/2011 EUR 300 5.250 Ba2 BB
USD 478 5.750 Ba2 BBPriory Healthcare Holdings Ltd Healthcare 27/01/2011 GBP 495 7.000 B1 BB BB+
GBP 204 8.875 B3 B BBAfren plc Oil & Gas 28/01/2011 USD 337 11.500 B‐ BBakkavor Finance 2 plc Food & Beverage GBP 411 8.250 B2 BArdagh Packaging Finance plc Finance 01/02/2011 EUR 200 9.250 B3 B‐Towergate Finance plc Insurance 04/02/2011 GBP 268 8.500 B1 BB
GBP 339 10.500 B3 B‐UPCB Finance III Ltd Telecommunications 07/02/2011 USD 736 6.625 Ba3 B+Telenet Finance Luxembourg lll SA Telecommunications 10/02/2011 EUR 300 6.625 Ba3 BB+Afren plc Oil & Gas 11/02/2011 USD 37 11.500 NR B‐ BFiat Industrial Finance Europe SA Finance 07/03/2011 EUR 1,000 5.250 Ba2 BB+
EUR 1,200 6.250 Ba2 BB+Grohe Holding GmbH Consumer Products 08/03/2011 EUR 500 3MEuribor + 400 B2 B‐Pernod Ricard SA Food & Beverage EUR 1,000 5.000 Ba1 BB+ BB+Moto Finance plc Dining & Lodging 11/03/2011 GBP 204 10.250 CCC+Obrascon Huarte Lain SA ‐ OHL Construction/Building 18/03/2011 EUR 425 8.750 Ba2 NRKabel Baden‐Wuerttemberg GmbH & Co KG Telecommunications 23/03/2011 EUR 800 7.750 B1 B+
EUR 680 9.500 Caa1 B‐EUR 420 3MEuribor + 425 B1 B+USD 352 7.500 B1 B+
Ontex IV SA Forestry & Paper 24/03/2011 EUR 320 7.500 Ba3 B+EUR 235 9.000 B3 B‐EUR 280 3MEuribor + 412.5 B+
Aperam Metal & Steel 25/03/2011 USD 177 7.375 B1 BBUSD 177 7.750 B1 BB
Fiat Finance & Trade Ltd SA Auto/Truck 29/03/2011 EUR 1,000 6.375 Ba1 BB BB+Heidelberger Druckmaschinen AG Machinery 31/03/2011 EUR 304 9.250 Caa1 B‐
Source: Bloomberg, Dealogic
10 AFME High Yield Division
Q1 2011
Issuer Industry Group Date CurrencyAmount (Millions) Coupon Moodys S&P Fitch
Conti‐Gummi Finance BV Auto/Truck 02/09/2010 EUR 1,000 7.500 B1 BRenault SA Auto/Truck 13/09/2010 EUR 250 5.625 Ba1 BB BBPicard Bondco SA Food & Beverage 22/09/2010 EUR 300 9.000 B3 B‐ B‐Rhodia SA Chemicals 22/09/2010 USD 400 6.875 B1 BBConti‐Gummi Finance BV Auto/Truck 28/09/2010 EUR 625 6.500 B1
EUR 625 7.125 B1Ardagh Glass Group plc Consumer Products 30/09/2010 EUR 825 7.375 Ba3 BB‐
USD 350 7.375 Ba3 BB‐EUR 275 9.250 B3 B‐USD 450 9.125 B3 B‐
SEAT PagineGialle SpA Publishing 01/10/2010 EUR 200 10.500 B1e B+Hapag‐Lloyd AG Transportation 01/10/2010 EUR 330 9.000 B3 B
USD 250 9.750 B3 BSunrise Communications AG Telecommunications 07/10/2010 CHF 300 7.000 Ba3 BB
EUR 505 8.500 B3 BEUR 371 7.000 Ba3 BB
Navios Maritime Acquisition Corp Transportation 07/10/2010 USD 400 8.625 B3 B+ATU Auto‐Teile‐Unger Handels GmbH & Co KG Auto/Truck 08/10/2010 EUR 375 11.000 B3 B‐
EUR 75 6M Euribor+975 B3 B‐Exova Group Ltd Professional Services 15/10/2010 GBP 155 10.500 B3 B‐ NRNara Cable Funding Ltd Telecommunications 15/10/2010 EUR 700 8.875 B2 B‐ BB‐Abengoa Finance SAU Construction/Building 19/10/2010 USD 650 8.875 Ba3 B+ BBWendel Investissement SA Finance 20/10/2010 EUR 300 4.875 BB‐Ziggo BV Telecommunications 21/10/2010 EUR 750 6.125 Ba2 BB BBHapag‐Lloyd AG Transportation 25/10/2010 EUR 150 9.000 B3 BR&R Ice Cream Ltd Food & Beverage 28/10/2010 EUR 350 8.375 B2 BB‐Siemens Enterprise Communications GmbH & Co Professional Services 29/10/2010 EUR 200 10.750 B3 B‐BAA (SH) plc Transportation 02/11/2010 GBP 325 7.125 Ba3 BB+InterXion Holding NV Telecommunications 04/11/2010 EUR 60 9.500 B2 BB‐Sunrise Communications AG Telecommunications 08/11/2010 EUR 56 8.500 B3 BKUKA AG Machinery 11/11/2010 EUR 202 8.750 B3 B‐Wind Acquisition Finance SA Telecommunications 18/11/2010 EUR 1,750 7.375 Ba2 BB‐
USD 1,300 7.250 Ba2 BB‐ BB+Europcar Groupe SA Transportation 18/11/2010 EUR 400 9.375 Caa1 B‐Stora Enso Oyj Forestry & Paper 22/11/2010 SEK 400 3M Other+370 Ba2 BB
SEK 1,100 5.750 BBEFG Hellas (Cayman Islands) Ltd Finance 23/11/2010 EUR 5 N/A Baa3 BB BBB‐
USD 3 N/A Baa3 BB BBB‐Taylor Wimpey plc Construction/Building 25/11/2010 GBP 250 10.375 B2 B+Alcatel Lucent SA Telecommunications 25/11/2010 EUR 500 8.500 B1 BMark IV Europe Lux SCA Auto/Truck 02/12/2010 EUR 200 8.875 Ba3 BB‐EFG Hellas (Cayman Islands) Ltd Finance 03/12/2010 EUR 1 N/A Baa3 BB BBB‐CEVA Group plc Holding Companies 09/12/2010 USD 450 8.375 B1 B
Source: Bloomberg, Dealogic
11 AFME High Yield Division
Q1 2011
5. Issuance – European Emerging Market High Yield Bonds 5.1. European Emerging Market HY Bond Issuance 5.2. European Emerging Market HY Bond Issuance by
Currency
0
10
20
30
40
50
60
70
80
90
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 - Q1
# of Deals€ Billions
Source: Dealogic
European Emerging Market HY Bond Issuance2003 - 2011:Q1
Europe Emerging HY
# of Deals (Right)
0.0
5.0
10.0
15.0
20.0
25.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Emerging Market HY Issuance by Currency2003 - 2011:Q1
Other
USD
GBP
EUR
5.3. European Emerging Market HY Issuance by Industry 5.4. European Emerging Market HY Issuance by Country of
Risk
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.
Transportation
Food & Beverage
Agribusiness
Mining
Metal & Steel
Finance
Telecommunications
4€ Billions
Source: Dealogic
European Emerging Market HY Issuance by Industry2011:Q1
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Hungary
Azerbaijan
Croatia
Kazakhstan
Ukraine
Russian Federation
€ Billions
Source: Dealogic
European Emerging Market HY Issuance by Country of Risk2011:Q1
5.5. European Emerging Market HY Issuance, Fixed vs. Floating
5.6. European Emerging Market HY Issuance, Sponsored vs. Corporate
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Emerging Market HY Bond Issuance, Fixed vs Floating2003 - 2011:Q1
FloatingFixed
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
€ Billions
Source: Dealogic
European Emerging Market HY Issuance, Sponsored vs Corporate2003 - 2011:Q1
EM LBO
EM Corporate
12 AFME High Yield Division
Q1 2011
5.7. Emerging Market HY Bond Issuance
Issuer Industry Group Date Currency Amount (Millions) Coupon Moodys S&P Fitch
Agrokor dd Food & Beverage 17/01/2011 EUR 150 10.000 B2 BHalyk Savings Bank of Kazakhstan ‐ HSBK Finance 20/01/2011 USD 379 7.250 Ba3 B+ B+TMK OAO ‐ Pipe Metallurgical Works OAO Metal & Steel 21/01/2011 USD 384 7.750 B1 BVimpel‐Communications OAO ‐ VimpelCom Telecommunications 26/01/2011 USD 367 6.493 Ba3 BB+
USD 735 7.748 Ba3 BB+Metinvest BV Metal & Steel 08/02/2011 USD 557 8.750 B2 BAzerbaijan State Railway Transportation 09/02/2011 USD 92 8.250State Savings Banks of Ukraine ‐ OSCHADBANK VAT
Finance 02/03/2011 USD 369 8.250 B2 B
Home Credit & Finance Bank OOO ‐ HCFB Finance 11/03/2011 USD 359 7.000 Ba3 B+Magyar Telecom BV ‐ Matel Telecommunications 23/03/2011 EUR 80 9.500 B2 BMriya Agro Holding plc Agribusiness 25/03/2011 USD 179 10.950 B B‐Ferrexpo Finance plc Mining 31/03/2011 USD 353 7.875 B3 B‐ B
Source: Bloomberg, Dealogic
13 AFME High Yield Division
Q1 2011
6. Credit Quality 6.1. European HY Default Rate 6.2. European Loan Default Rate1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
Percent
Source: Standard & Poor's
European HY Default Rate (LTM)Mar. 2007 - Mar. 2011
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2005 2006 2007 2008 2009 2010
Percent
Source: Fitch Ratings
European Loan Default Rate (LTM)2005:Q1 - 2010:Q3
Senior Leveraged Loans (Adjusted for CC*/C*)
Senior Leveraged Loan Default Rate (Unadjusted)
Mezzanine Loan (Adjusted for CC*/C*)
Mezzanine Loan Default (Unadjusted)
6.3. Developed Europe Issuer Rating Actions2 6.4. Emerging Europe Issuer Rating Actions3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
10
20
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2008 2009 2010 2011
# Of Issuers
Source: Standard & Poor's
S&P Developed Europe Issuer Rating Actions2008 - 2011:Q1
Upgrades
Downgrades
Downgrade/Upgrade Ratio (Right)
0%
20%
40%
60%
80%
100%
120%
0
10
20
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2008 2009 2010 2011
# Of Issuers
Source: Standard & Poor's
S&P Emerging Europe Issuer Rating Actions2008 - 2011:Q1
Upgrades
Downgrades
Downgrade/Upgrade Ratio (Right)
6.5. Developed European Industry Rating Actions by $ Amount
6.6. Emerging European Industry Rating Actions by $ Amount
-40,000 0 40,000 80,000 120,000
Capital Goods
Chemicals, Packaging and Environmental Services
Consumer Products
Forest Products and Building Materials
High Technology
Media and Entertainment
Telecommunications
Transportation
Utility
Financial Institutions
Retail/Restaurants
Aerospace and defense
Automotive
Mortgage institutions
USD Billions
Source: Standard & Poor's
S&P Developed Europe Issuer Rating Actions by $ Amount ex Sovereign & Banks2011:Q1
Downgrades
Upgrades
-2,000 0 2,000 4,000 6,000 8,000 10,000
Media and Entertainment
Metals, Mining and Steel
USD Billions
Source: Standard & Poor's
S&P Emerging Europe Issuer Rating Actions by $ Amount ex Sovereign & Banks2011:Q1
Downgrades
Upgrades
1 Fitch data are as of 2010 Q3; data may be a quarter or two behind due to timing of publications. 2 Numbers include both corporate and sovereigns. 3 Numbers include both corporate and sovereigns.
14 AFME High Yield Division
Q1 2011
7. Relative Value 7.1. European HY Bonds, Cash vs. Synthetic 7.2. European Leveraged Loans, Cash vs. Synthetic
0
200
400
600
800
1000
1200
1400
Apr-09 Oct-09 Apr-10 Oct-10
Basis Points
Sources: Markit
Bonds, Cash vs. SyntheticApr. 2009 - Mar. 2011
iBoxx EURiTraxx XO 5Y
50.0
60.0
70.0
80.0
90.0
100.0
110.0
Apr-09 Oct-09 Apr-10 Oct-10
Price/Bid
Sources: Thomson Reuters LPC, Markit
Loans, Cash vs. SyntheticApr. 2009 - Mar. 2011
LevX Senior
Euro Lev Top 40
8. Total Return
8.1. European HY Bond Total Return 8.2. European Leveraged Loan Total Return
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
Percentage
Source: Bank of America-Merrill Lynch
European High Yield Total Return 2003 - 2011:Q1
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
2010 2011
2003 2004 2005 2006 2007 2008 2009 2010 Q1
Percentage
Source: Standard and Poor's LCDELLI EUR-denominated only unavailable for 2003 and 2004.
European Leveraged Loan Total Return 2003 - 2011:Q1
ELLI
ELLI (EUR‐denominated only)
8.3. Asset Class Total Return
-5 0 5 10 15 20
Euro HY CCC and Lower RatedU.S. HY Distressed
Euro Fallen Angel HYRussell 2000
S&P 500Global Fallen Angel HY
Euro HY B RatedEuro High Yield
U.S. HYEuro HY BB rated
S&P ELLIU.S. ABS/MBS
U.S. CorporatesMCSI EM
U.S. Mortgages 30YEMU Financial Corporates
U.S. MunicipalU.S. Treasuries
EMU Covered BondsEMU ABS/MBS
Per
cent
age
Source: BofA-ML, Bloomberg
Asset Class Total Returns2010:Q1 v 2011:Q1
Q1 2011
Q1 2010
15 AFME High Yield Division
Q1 2011
Summary of the Methodologies Adopted for this Report
1. Leveraged Issuance – Overview 1.1. – 1.3. Leveraged Loans and High Yield Bonds Leveraged loan data are sourced from Thomson Reuters LPC and Dealogic.
Leveraged loan data from Thomson Reuters LPC are defined primarily as having sub-investment grade ratings and/or a margin spread minimum of 200 basis points (spread minimums will vary from year to year to make Thomson LPC’s cutoff). Leveraged loan aggregates will include first lien, second lien, and mezzanine financing. Discrepancies in Thomson Reuters LPC data are due to rounding and/or currency rate of exchange.
Leveraged loan data from Dealogic are defined primarily as coming from a leveraged or highly leveraged European deal; loan tranches must have sub-investment grade ratings, or, if unrated, a margin spread minimum of 125 basis points over a benchmark (e.g., Euribor, LIBOR). Under these guidelines, sub-investment grade-rated loans with a margin spread of less than 125 basis points are included. Deals must be European and are inclusive of both developed and emerging market Europe as defined in high yield criteria in Section 3. Deals must also be marketed either in Europe or in the United States. Loans not EUR-denominated are converted to EUR as of credit date for purposes of aggregation. Aggregates include new money as well as non-new money deals.
Criteria for high yield bond transactions can be found in Section 3, 4, and 5.
1.4. – 1.7. Bank Lending Surveys Data for loan demand and credit standards are sourced from the ECB’s bank lending survey. Graph numbers are net percentages of reporting banks.
1.8. Global Comparison – High Yield Issuance Data for global high yield issuance are sourced from Dealogic. Asian deals are inclusive of Japan and Australia.
2. Issuance – Leveraged Loans 2.1. – 2.2. Leveraged loan issuance data are sourced primarily from Dealogic and Thomson Reuters LPC. For more details on qualifying criteria, please refer to section 1.
2.3. Forward Pipeline of Leveraged Loan Market Forward leveraged loan pipeline data are sourced from S&P LCD.
2.4. S&P ELLI Total Institutional Loans Outstanding Total institutional loan outstanding data are sourced from S&P LCD and are outstanding loans in the S&P ELLI index.
2.5. S&P ELLI Ratings Diversification S&P ELLI ratings diversification are the percentages of currently outstanding loans in S&P’s ELLI index that are rated accordingly. Data are provided by S&P LCD.
2.6. European Leveraged Loan Ratios European leveraged loan ratios are sourced from Fitch Ratings and are a debt/EBITDA ratio across Fitch’s shadow rated universe. Transactions included in the ratio include new as well as existing transactions and ratings may be assigned at various points in time throughout the year.
2.7. – 2.8. Loan Spreads Loan spread data are sourced from Dealogic under our criteria for leveraged loans (see Section 1). For purposes of loan spread calculations, deals marketed in the US are excluded. Spreads are a weighted average of spread margin on new leveraged issuance on a rolling twelve months basis, and are typically benchmarked to LIBOR or EURIBOR. Institutional loan spread data are inclusive of 2nd lien; pro rata spreads include all revolvers and term loan A (Tla).
3. Issuance – High Yield Bonds Overview High yield bond transactions are sourced primarily from Dealogic, with supplemental information sourced from Bloomberg. High yield transactions are defined as transactions with a Dealogic “effective” rating of equal or less than BB+, and may include unrated transactions based on issuer and desk notes. Split-junk rated transactions are generally excluded.
European issuance, inclusive of both emerging market Europe and developed market Europe, are defined as an issue having a Dealogic “deal nationality” as well as “nationality of risk” within Europe issued in the euro, foreign, and global markets; deals marketed locally are excluded. Sovereign, sub-sovereign, and supranational parent issuers are excluded from issuance, as well as ABS/MBS issuers.
Emerging market Europe and developed market European issuance are defined by nationality of risk, rather than nationality of deal, and although primarily sourced from Dealogic, are ultimately subject to AFME’s discretion. Emerging and developed market issuance are mutually exclusive and will contain no overlap unless otherwise mentioned.
European emerging market bonds are further defined with having a minimum deal size of €75.0 million; deals on the same day from the same issuer are aggregated for the purpose of meeting this minimum. Russian ruble (RUB)-denominated issuance are excluded due to differences in terms and documentation; as of 4Q’10 this criteria no longer applies and may be included on a case by case basis.
16 AFME High Yield Division
Q1 2011
3.2. European HY Issuance by Sponsor Data for high yield issuance by sponsor are sourced from Dealogic. LBO deals are defined as all high yield transactions whose issuer parent is a public or private finance entity (i.e., a financial sponsor), regardless of use of proceeds.
3.3. – 3.7. European Corporate Bonds Outstanding Data for European corporate outstanding are sourced from Bloomberg and AFME/SIFMA estimates. Criteria for European corporate bonds are: bonds must be placed in the euro, foreign, and global markets (domestically placed issues are excluded) with a nationality of issue and risk from a European developed or emerging market country as defined by AFME. Corporate bonds exclude all issuance from banks and financials, and additionally excludes all covered bonds, warrants, deposit notes, receipts, and certificates of deposit. No currencies are excluded in this analysis and all non-EUR currencies are converted to EUR at end-quarter exchange rates.
To qualify as an investment grade corporate bond, a security must have a minimum of one investment grade rating from Moody’s, Standard and Poor’s, or Fitch Ratings. Split-rated securities are also included in investment-grade numbers. To qualify as a high yield corporate bond, a security must have a minimum of one sub-investment-grade rating from Moody’s, Standard and Poor’s, or Fitch Ratings; withdrawn ratings are not counted for purposes of determining high yield. Unless otherwise specified, high yield outstanding totals in discussion commentary will include non-rated securities, regardless of the credit quality of the debt or issuer.
Corporate bonds outstanding include certain securities that may be considered corporate securitisations or structured finance securities; while all effort is made to exclude the latter, the former will be counted toward the corporate bonds outstanding total, and will subsequently overlap to some extent to AFME / ESF structured finance outstanding numbers.
3.7. European HY Issuance By Use of Proceeds Data for HY issuance by use of proceeds are sourced from Dealogic and aggregated for the purposes of this calculation. Please refer to Section 3 for criteria on high yield issue inclusion.
3.8. European HY Issuance, Senior Secured Share Data for HY issuance by seniority are sourced from Dealogic and Bloomberg. “Senior Unsecured” totals include all bonds that are senior but not senior secured.
4. Issuance – European Developed Market High Yield Bonds 4.1. – 4.7. High yield bond issuance data are sourced from Dealogic. For further criteria on how high yield issuance are defined, please refer to section 3.
Developed European issuance are deals predominantly from western Europe and includes deals from Andorra, Austria,
Belgium, Bulgaria, Cyprus, Switzerland, Germany, Denmark, Spain, Estonia, Finland, France, Faroe Islands, United Kingdom, Guernsey, Gibraltar, Greenland, Greece, Isle of Man, Ireland, Iceland, Italy, Jersey, Liechtenstein, Luxembourg, Monaco, Malta, Montenegro, Netherlands, Norway, Portugal, San Marino, and Sweden.
5. Issuance – European Emerging Market High Yield Bonds 5.1. – 5.7. High yield bond issuance data are sourced from Dealogic. Criteria for all high yield issuance are found in section 3.
Emerging market European issuance deals are predominantly from eastern Europe but will also additionally include Turkey, the Russian Federation, Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan, Azerbaijan, and Kyrgyzstan. Certain sub-investment grade countries are not included in the emerging market total, including, among others, Iceland and Greece.
6. Credit Quality 6.1. European HY Default Rate European HY bond default rates are sourced from S&P and are on a trailing 12 month basis.
“Europe” for the S&P default rate is defined to include Austria, Belgium, Bulgaria, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom. Countries are subject to revision.
6.2. European Loan Default Rate European loan default rates, both mezzanine and senior leveraged loans, are sourced from Fitch Ratings and are on a LTM basis.
Adjusted rates for both mezzanine and senior loans are inclusive of Fitch’s CC*/C* shadow-rated leveraged credits, whereas unadjusted rates are exclusive of these rated credits. Senior leveraged loan data is available only for 2009.
6.3. – 6.4. European Issuer Rating Actions European issuer upgrades and downgrades are sourced from S&P. The breakdown by emerging market and developed Europe are from AFME’s definition of developed and emerging markets and would be, under S&P’s guidelines, a combination of both European and EMEA rating actions. Multiple downgrades of a single issuer are counted separately. Rating actions are inclusive of both corporate (both credit and merger-related) as well as sovereign ratings.
6.5. – 6.6. European Issuer Rating Actions by $ Amount Rating actions by US dollar amount, industry, and country are sourced from S&P. Breakdown by emerging market and developed Europe are from AFME’s definition of developed and emerging markets and would be, under S&P’s guidelines, a combination of both European and EMEA rating actions.
17 AFME High Yield Division
Q1 2011
7. Cash and Synthetic 7.1. – 7.2. Loans and Bonds, Cash and Synthetic Data are sourced from Markit and Thomson Reuters LPC. High yield bond cash and synthetic spreads from Markit; European leveraged loan cash bid prices from Thomson Reuters LPC, and European leveraged loans synthetic prices from Markit.
8. Total Return 8.1. European HY Bond Total Return European HY bond total return data are sourced from the Bank of America-Merrill Lynch’s Euro High Yield Index (HE00). The index tracks the performance of EUR-denominated below-investment-grade corporate debt publicly issued in the euro domestic or Eurobond markets. Qualifying securities must have a below-investment-grade rating and an investment-grade rated country of risk. Qualifying securities must have at least one year remaining term to maturity, fixed coupon schedule and minimum amount outstanding of €100 million. Original issue zero coupon bonds, “global securities” (debt issued simultaneously in the Eurobond and euro domestic markets), 144a securities and pay-in-kind securities, including toggle notes, qualify for inclusion in the index. Callable perpetual securities qualify provided they are at least one year from the first call date. Fixed-to-floating rate securities also qualify provided they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating rate security. Defaulted, warrant-bearing and euro legacy currency securities are excluded from the index.
8.2. European Leveraged Loan Total Return Total return data are provided by S&P LCD and are total returns from S&P’s ELLI index, both ELLI and EUR-denominated ELLI. Total returns for ELLI EUR-denominated data are unavailable for 2003 and 2004.
8.3. Asset Class Total Return (Cash Basis) Total returns are sourced from respective index owners and Bank of America-Merrill Lynch’s indices.
Disclaimer The information and opinion commentary in this High Yield and Leveraged Loan Report (Report) was prepared by the leveraged finance division of the Association for Financial Markets in Europe (AFME) and the Securities Industry and Financial Markets Association (SIFMA). AFME and SIFMA believe that the information in the Report, which has been obtained from multiple sources believed to be reliable, is reliable as of the date of publication. In no event, however, does either of AFME and SIFMA make any representation as to the accuracy or completeness of such information. AFME and SIFMA have no obligation to update, modify or amend the information in this Report or to otherwise notify readers if any information in the Report becomes outdated or inaccurate. AFME and SIFMA will make every effort to include updated information as it becomes available and in subsequent reports. As information is collected from multiple sources and estimates by the individual sources may differ
from one another, estimates for similar types of data could vary within the Report.
AFME
Gilbey Strub, Managing Director
Sidika Ulker, Associate www.afme.eu
SIFMA
Kyle Brandon, Managing Director, Director of Research
Sharon Sung, Research Analyst www.sifma.org
www.afme.eu
