Over the last 12 months, the European leveraged loan market has undergone a growth spurt, which expanded the size of the S&P European Leveraged Loan Index (ELLI) by 24%, to a record-setting €150 billion.
However, it was the borrowers at the riskier end of the credit-quality spectrum that drove this growth.
In the 12 months through March 31, the size of the single-B rated market grew by €30.5 billion—a 38% increase in total par amount—while the size of the better-quality, BB rated sub-index contracted by €3 billion (a 9% decrease).
Of course, the lower-rated names have always dominated the European loan market, and their par amount outstanding outweighs that of the higher-rated cohort by over four times, at €111 billion to €26.2 billion, respectively. However, in 2017 both sub-indices expanded in size on a trailing-12-month basis. This year, their paths have diverged, with the riskier issuers gobbling up market share. – David Cox/Marina Lukatsky
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