Leveraged finance (LevFin) issuance across the US and European institutional loan and high-yield (HY) bond markets rose 26% year-on-year (YoY) to USD 466bn in the first nine months of 2023. Although issuance bounced back from the lows of last year as market conditions improved and spreads tightened, in the absence of a meaningful mergers & acquisitions (M&A)/leveraged buyout (LBO) pipeline, LevFin volumes still lagged well behind historical levels.
With a limited supply of new money paper, refinancing and amendment-and-extension (A&E) transactions accounted for the bulk of activity this year. More opportunistic deals such as dividend recaps and loan repricing exercises also resurfaced in the third quarter as borrowers sought to take advantage of strong investor demand and tighter clearing yields.
A total of USD 174bn was transacted across institutional loans and HY bonds in 3Q23, representing an 11% increase from the previous quarter. The largest boost to volumes came from the US leveraged loan market where activity accelerated in August, while the European loan and HY bond markets also regained momentum in September.
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