Moody's: EMEA leveraged finance issuance volume reaches post-crisis high in 2017

Leveraged finance issuance in Europe, Middle East and Africa (EMEA) hit a post-crisis high in full-year 2017, says Moody's Investors Service (Moody's) in an update to the markets published today. While 2018 issuance has started strongly, it will be a challenge to top Q1 2017 volumes.

Leveraged loan issuance volume reached $166 billion in 2017, exceeding 2016 by 245%, and topping the previous post-crisis high of $119 billion achieved in 2014 by 40%. High-yield bond volume, at $104 billion in 2017, is 58% up on 2016, but falls 14% short of 2014's high of $121 billion. The high activity in the last few weeks of 2017 also marked a reversal of prior trends.

"Judging by the first few weeks of January 2018, issuance is likely to remain solid for the first quarter of 2018. However, it will be a formidable challenge to match leveraged finance issuance of $83 billion in the first quarter of 2017," says Peter Firth, an Associate Managing Director at Moody's.

With a strong and receptive market, additional risks are emerging. Issuance at lower rating levels is increasing, for example at B3 with weaker first-time issuers accessing or trying to access the market. Thirty percent of high-yield bond issuers in November and December carried a B3 or Caa1 corporate family rating. Transactions are also becoming more aggressive with potentially increasing PIK note issuance. Overall risks to the strong market momentum also remain, such as rising interest rates and tightening monetary policies across the US, UK and Europe.