Leveraged finance issuance falls amid coronavirus

European leveraged finance issuance dropped in the first quarter as the coronavirus pandemic hit markets, leading to a 15.3% fall in accumulated proceeds, a report by the Association for Financial Markets in Europe said.

Total accumulated proceeds across European leveraged loans and high-yield bonds was €68 billion ($76.5 billion) for the three months ended March 31, down from €80.3 billion in the fourth quarter 2019. The European High Yield and Leveraged Loan report was published Friday.

The decrease was largely driven by a 16.3% fall in leveraged loans issuance, which totaled €38.8 billion across 73 deals for the first quarter compared with €46.4 billion on 67 deals for the previous quarter. Issuance was up year-on-year, by 32.3% from €29.3 billion across 60 deals for the first quarter, 2019.

The fall in issuance came in March, following active months of issues in January and February.

Leveraged loan issuance was led by chemicals, health care and the food and beverage sectors.

Primary high-yield bonds issued totaled €29.2 billion on 71 deals in the first quarter of the year, a 13.9% decrease from €33.9 billion across 67 deals in the fourth quarter of 2019 and a 70.7% increase from €17.1 billion on 40 deals in the first quarter of 2019.

Developed market Europe issuance accounted for 74% of total issuance in the first quarter, while the remaining 28% of issuance came from emerging Europe firms.

Telecommunications, finance and transportation accounted for 72.8% of the total high-yield issuance volume in developed Europe in the quarter. The remainder of bonds were issued by firms in construction, leisure, health care and other sectors.

The proportion of dollar-denominated issuance decreased to 24.2% of all issuance in the quarter, down from 26.0% for the fourth quarter of 2019 and from 34.8% for the same quarter a year earlier.

AFME said leveraged finance issuance resumed in May, largely in the leveraged loan market. However, volumes remained below the monthly average seen before the outbreak of the COVID-19 pandemic.