* EMEA first half total of US$434bn is 6% down y-o-y
* Emerging markets lending lowest since 2009
* Leveraged loan volume at ten-year high
By Alasdair Reilly and Claire Ruckin
LONDON, June 28 (Reuters) - First half syndicated lending in Europe, the Middle East and Africa (EMEA) of US$434bn was down 6% compared to the first six months of 2016, as lending to borrowers in the region’s emerging markets hit an eight-year low, Thomson Reuters LPC data shows.
First half volume in Central and Eastern Europe, Middle East and Africa was just US$52.9bn - its lowest first-half total since 2009 and down significantly from US$125.4bn raised in the same period last year.
The drop was mainly down to a huge drop in borrowing opportunities in the Middle East - volume plummeted to US$6.5bn in the second quarter from US$43bn during the same three months of 2016.
“At the moment everything is slow,” a Middle East-focussed loans banker said.
Refinancing continues to be the main driver of activity in EMEA with volume of US$273bn in the first half. This was 28% higher than a year earlier as many companies took advantage of high levels of market liquidity and ultra low interest rates to amend and extend existing loans.
The largest refinancings of the second quarter included global diversified natural resource company Glencore's US$7.335bn refinancing, Irish building supplies group CRH’s €3.5bn amend and extend, and French drinks maker Pernod Ricard’s €2.5bn refinancing.
A handful of large acquisition loans earlier in the year helped M&A loan volume rise to US$132bn in the first half, up 41% year-on-year, but acquisition financing became patchy in the second quarter.
Italian motorway group Atlantia placed the largest M&A financing of the second quarter with a €14.7bn loan backing its proposed takeover of Spain’s Abertis. The loan closed with a group of 24 international banks in May.
Despite the increase in M&A and refinancing, lending to Europe’s high grade borrowers was 12% down at the half year point at US$235bn, as wider macroeconomic and political issues weighed.
“There’s been a lot of uncertainty to deal with. An ongoing round of European elections, the continuing dramas around Brexit, Donald Trump and North Korea -- it’s no wonder that volumes have been hit,” a senior loans banker said. TEN-YEAR HIGH First-half leveraged loan volume of US$133bn was two-thirds higher than the same period last year as refinancings, repricings and recapitalisations flooded the market.
With borrowers taking advantage of the deep liquidity on offer to improve portfolio companies, volume reached its highest level since 2007.
The ten-year high means first-half volume has reached nearly three-quarters of last year’s annual US$182.73bn total for European leveraged loans.
Non-event driven financings of US$118.4bn accounted for a massive 88.8% of all leveraged loan activity in the first half as borrowers sought to take dividends, reprice debt on better terms, extend maturities and improve documents amid a lack of buyout deals.
Buyout loans totalled US$14.88bn, the lowest level since 2014 as sponsors struggled to compete for assets against high valuations and cash-rich strategic bidders.
A €1.33bn term loan that formed part of a wider US$3.2bn-equivalent refinancing for Liberty Global's Belgian cable and mobile company Telenet was the leveraged largest loan of the second quarter, followed by a US$1.225bn-equivalent euro-denominated term loan backing the take-private of Hong Kong-based international schools operator Nord Anglia.
The pipeline of new deals is building, which should bolster event-driven volumes in the third quarter. They include loans for Danish packaging group Faerch Plast; French nursing home company DomusVi; UK-headquartered health food and supplements chain Holland & Barrett; cleaning and chemicals systems business Diversey Care; and US life sciences company Avantor’s take-private of lab supplies company VWR Corp.
“There is an adequate pipeline of deals to launch and a good potential pipeline of deals to come, however it is not enough to satisfy demand,” a head of leveraged finance said.
A €1.95bn seven-year term loan backing the buyout of German drugmaker Stada would have been the largest leveraged loan of the year to launch so far but is set to fall away if Bain and Cinven are unable to put in a successful new offer for the business, after an initial takeover attempt failed.
Bank of America Merrill Lynch topped the first half EMEA syndicated loan bookrunner league table with a US$23.74bn market share and 55 deals. HSBC claimed second place with US$22.89bn and 83 deals, while Deutsche Bank was third with a US$22.64bn market share and 58 deals.
Additional reporting by Sandrine Bradley; Editing by Christopher Mangham