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Lpc europes leveraged loan market braced for _75bn of deals in january


Dec 20 Europe's leveraged loan market is gearing up for a busy January with around 7.5bn-equivalent of underwritten paper set to be syndicated. The pipeline has been building with a number of auction processes concluding at the end of November and December, leading banks to hold off syndication until next year. The loans will be welcomed by a growing number of buyers in Europe's leveraged loan market, including new and existing CLOs, managed accounts and banks, many of which have an increasing appetite for higher yielding, covenant-lite term loan B paper. One of the most anticipated deals for January is US$1.907bn-equivalent of loans backing US-based website domain name provider GoDaddy's acquisition of peer Host Europe Group. The fully committed debt financing includes a US$1.377bn-equivalent incremental term loan, split into a dollar-denominated tranche and a euro-denominated tranche. Other large deals include 1.5bn of leveraged loans to back buyout group Lone Star's acquisition of Germany-based building materials maker Xella and 1bn to back UK software company Micro Focus International's acquisition of Hewlett Packard Enterprises' software business, which forms part of a wider US$5bn loan financing.

In another cross-border deal, banks will syndicate around 200m for Blackstone's Acetow buy, the cigarette filter business spun out of Belgian chemicals group Solvay. That deal is also likely to have around US$600m of loans. Credit Suisse, Goldman Sachs and Deutsche Bank are among the line-up of banks providing the financing. Credit Suisse, UBS and Rabobank are lining up a leveraged loan financing to back CVC Capital Partners' buyout of Belgian aluminium systems manufacturer Corialis, while Onex's buyout of British holiday park operator Parkdean Resorts will be backed with a £750m leveraged loan. Smaller deals include around £150m of loans for EQT's buyout of UK veterinary care business Independent Vetcare; 260m for Ardian's buyout of French medical packaging manufacturer Unither Pharmaceuticals; 300m for Israeli furniture maker Keter Group's acquisition of Italian plastic furniture manufacturer ABM Italia; and a 286m-equivalent loan financing to back Mid Europa Partners' buyout of Romania's largest supermarket chain Profi Rom Food.

A £285m term loan for UK private hospital operator BMI Healthcare also has to relaunch. It was postponed in November until negotiations with its external landlord are completed.

HOLD UP While some bankers are not delighted at holding paper on the balance sheet during the Christmas period, others feel confident it will sell quickly once launched."Holding loans is generally something to be avoided but people are pragmatic about it and it is arguably better than launching a process now as the window is shut. Syndicate desks don't have a problem from a market risk perspective, but banks as a whole prefer not to hold significant positions over the year-end. It is more of an issue for banks with December year-end," a syndicate head said. The flow of deals will go some way to alleviate the technical conditions and downward pricing pressure that have plagued Europe's leveraged loan market in 2016, but is unlikely to reverse it entirely."It is good that deals are lined up to launch, but the expectation is that it will not be enough to mop up surplus capacity. It should take some pressure off price tightening, but not enough to reverse it and see pricing rise again," the syndicate head said.

Money markets banks reliance on ecb funding easing


Oct 23 Euro zone banks' reliance on ECB funding eased again on Tuesday as the central bank's promise to provide aid if asked by for by Spain and Italy allowed some institutions to access, tentatively thawing funding markets. Banks borrowed 77 billion euros at the European Central Bank's weekly financing operation, down from 92 billion euros last week and taking the total decline since the beginning of September to almost 50 billion euros."Banks in peripheral countries are getting more access to money markets again," said Benjamin Schroeder, rate strategist at Commerzbank. "(They) have a better standing now."Sentiment towards the euro zone's main peripheral issuers Spain and Italy has improved markedly since the ECB in August outlined a plan to buy the bonds of the region's struggling countries if they asked for help. The two countries had been almost totally reliant on their domestic banks to buy their sovereign bonds, leaving the institutions stuffed with debt and struggling to raise funds as potential lenders worried about the effect of a collapse in value of that paper.

But with the ECB expected to act as a backstop, bond prices have recovered and some banks are tentatively finding their way back to the interbank lending market."We're seeing a few more overnight (credit) lines being put back in, but more for the Italian banks," one money market trader said. "But it's all very name dependent."Italian banks' borrowing at the ECB's weekly financing operations more than halved to just over 4 billion euros in September, compared with August, according to Bank of Italy data.

In Spain, there was a decline of just over 3 billion euros to 71 billion euros, Bank of Spain data showed. However at that time - the end of September - the total size of the weekly financing operation was still close to 120 billion euros."There's some scope for (Spain's borrowing) to drop further," Schroeder said.

With excess liquidity in the euro zone banking system still around 675 billion euros - albeit down around 100 billion euros since early September - some banks are expected to pay back some of the 1 trillion euros borrowed at two three-year financing operations. A Reuters poll last week showed two-thirds of money market traders expected some of the loans to be repaid because some banks had cheaper funding options. Meanwhile, the trader said there were also signs that banks were lending to one another for longer periods of time, with some prepared to part with their cash for up to 6 months."Lenders are still looking for the banks with better (credit) ratings, so, for example, the Scandinavian banks will pay a bit more yield and their ratings are still up so they can (borrow for longer)," he said. "We're seeing tiny shoots."Benchmark three-month interbank euro Libor rates eased to 0.13429 percent, while equivalent Euribor rates dipped to 0.203 percent.