Corporate Financing Analysis - US Leveraged Loan Market To Continue Record Run - 24 JULY 2017

The US leveraged loan market is enjoying a banner year and is well on course to secure its second consecutive annual increase in deal activity in 2017. With companies rated at the lower end of the risk spectrum eager to secure such loan deals in an environment where interest rates have remained low, coupled with the rise in demand for high-yielding assets which offer favourable returns, BMI expects activity in the market to trend higher in H217 and perhaps beyond.

According to Bloomberg data correct to July 14, US leveraged loans have totalled USD791.6bn in the 2017 y-t-d period (across 1346 deals), a tally which is well on course to overtake the USD983.0bn in such deals (between 2186 transactions) secured by firms on Main Street last year ( see BMI, ' US Market Leading Resurgence Of Leveraged Loans ' , April 13 2016), and which has already surpassed the USD747.4bn (1946 deals) in leveraged loans issued in the US across the 2015 full-year period. In fact, we highlight that if the issuance of such deals continues at its current rate then it is on course for a record year, outpacing the USD1,114.2bn in leveraged loan issuance (via 2727 deals) tallied across the 2013 full-year period. With corporate boardrooms enjoying greater access to the loan market, this all bodes well for M&A activity ( see BMI, ' Global M&A Rally To Sustain Across 2017 ' , March 29 2017) in the US both domestically and across borders - albeit with deals that are injected with a greater level of leverage. We highlight, however, that not all of the funds secured by boardrooms will be going towards dealmaking; rather, with prices favourable, we expect the lion's share of leveraged loans secured in 2017 to go towards refinancing arrangements.

Further good news for the leveraged loan market and the companies using it to raise fresh funds is that under the current US administration, the regulations on leveraged lending is likely to be relaxed, which is good news for smaller lenders and for consumers eager to secure fresh funds but whom have been previously been shut out of the borrowing market.

On Course For A Record Year
US Leveraged Loan Activity By Deal Value, USDbn
e/f = BMI estimate/forecast. Source: Bloomberg

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