It is still early in 2018, but the opening part of the year has seen the largest market share for sponsor-backed high-yield supply since 2011. The European market has also generated a larger volume on this measure than its U.S. counterpart so far this year — the first time this has happened.

The sponsor supply accounts for 47% of the year-to-date high-yield volume and 46% of deal count — the largest such shares since 50% in 2012 for the former, and 46% in 2015 for the latter. At €3.9 billion, the European volume is also more than the €3.6 billion-equivalent the U.S. market has hosted this year.
What's more, that 47% slice is greater than the average full-year market share stretching back to 2006. But despite a spike in 2015, the share of sponsored deals has declined from 39% in 2013, to 26% last year.

Risk tolerance
Sponsors are turning to the bond market largely because of its greater risk tolerance, be it a willingness to take on storied credits and/or those from less-liked sectors, and this situation has led to sponsors using high-yield for both acquisitions and refinancings.
Some 38% of the supply came from straight refinancings, the most prominent of which was Algeco Scotsman Global Finance plc, which procures financing for modular space developer Algeco/Scotsman Holding Sàrl Meanwhile, acquisition-related financings accounted for 62%, including deals from Swiss coffee and snack vending machine provider Selecta AG

Still, while it has been a stronger start to the year for sponsored bond deals than many players expected, the showing still pales in comparison to the loan market, where €14.7 billion of sponsored volume has been recorded, nearly 4x that of high-yield. Sponsors also accounted for 77% of the year-to-date loan volume.
Looking ahead, the bond market will keep hosting a decent amount of sponsored supply, but the loan market will see more.
On Flora Food Group's deal, for example, KKR & Co. LP is supporting its LBO with €3.9 billion of loans and €1.05 billion of high-yield paper. Still, at least high-yield will play a role here, as well as featuring in the sub debt for PAI Partners' LBO of soft drink and juice bottler Refresco Group NV (which also included roughly €1.9 billion-equivalent of loans that priced last year), the staple for paint and coatings producer Akzo Nobel NV's chemicals business, and the potential LBO of generic pharmaceutical manufacturer Zentiva NV.
Leveraged Commentary & Data (LCD) is an offering of S&P Global Market Intelligence, which is owned by S&P Global Inc.
