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RPT- Fitch European leveraged loan chart book - pressing discussions on refinancing risk
March 20, 2013 / 10:23 AM / 5 years ago

RPT- Fitch European leveraged loan chart book - pressing discussions on refinancing risk

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March 20 (Reuters) - (The following statement was released by the rating agency) Fitch Ratings has published its quarterly European leveraged loan chart book, which illustrates recent trends in European leveraged loan issuance, maturities, default rates as well as discussions around the issuers and sectors that are more at risk of a default as the 2014 maturity wall approaches. The analysis is based on Fitch's portfolio of credit opinions (CO) of about 280 European leveraged credits, representing EUR265bn of senior and junior loan debt. COs are private point-in-time assessments of credit risk principally based on confidential information supplied by collateralised loan obligation (CLO) investors on individual borrowers. COs are regularly updated but are not monitored as public ratings, and there is no relationship with the borrower's management or owners. They are identified by an '*' after the rating. Since 2007 leveraged loan issuance has been limited because of the need of banks to deleverage and the lack of new CLO issuance. With bullet maturities of the 2006-2007 deals coming due from 2014 that are coupled with the end of the legacy CLO reinvestment period and scheduled end of ECB's Long Term Refinancing Operations (LTRO), refinancing discussions are becoming a more pressing issue. Fitch's data and analysis highlights a bifurcation between issuers with a CO of 'B*' or higher, which are typically larger issuers that have generated cash flow and deleveraged such that they are generally capable of finding a refinancing solution in the high yield market if not an outright exit via IPO, secondary buyout or strategic sale. The smaller 'B-*' and below issuers generally reflect smaller companies in challenged sectors that will need more time to deleverage towards the average multiples observed in the European high yield bond and loan markets. The chart book highlights 'at-risk' issuers, or the 23% of the COs that carry 'B-' or below ratings and Negative Outlooks. These may have more difficulty addressing principal maturities through the practice of amending and extending senior loan facilities. Specifically, the presence of out-of-the money subordinated lenders, which is the case for 70% of the 'B-*' and below issuers in Fitch European CO portfolio, may lead to more defaults and the restructuring of balance sheets to achieve deleveraging. Link to Fitch Ratings' Report: Leveraged Loan Chart Book here

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