The market wobble in the leveraged loan and high-yield markets that began in June, accelerated in July, and peaked in August is moving toward a full-blown market repricing, according to Standard & Poor’s (S&P). Two Irish based collateralised loan managers, Guggenheim and Bank of Ireland, were readying CLO deals over the summer, but it appears that these deals have not yet come to the market, post-poned most likely until market conditions become more favourable.
Since mid-June 2007, 49 transactions, totaling €70 billion, have been affected - either because they were pulled, downsized, changed in structure or pricing, or put on hold. That compares with only 17 deals, worth €7 billion, that were launched and completed successfully within the same period. Of the 49 deals, nine were pulled, including the high-profile Alliance Boots deal.
The on-going credit crisis has completely shifted the supply and demand balance in the market, transferring the power from issuers to investors, and investors now have an opportunity to be selective about credits, paying close attention to credit risk if and when some of the transactions that have been pulled or postponed return to the market later in the year.
As a result of the crisis, there is a significant back-log of deals piling up. S&P say there are about 30 transactions totaling about €25 billion for which banks have been mandated but syndication has yet to be launched - and that figure doesn’t include the €70 billion in backlog transactions.
S&P expect that deals which do come on stream in Q4 will be structured more conservatively than during the first half of the year. |
