European Leveraged Loan Refinancing Wall

...Wall Meets Funding Cliff: Higher inter-bank funding costs and regulatory capital charges on non-investment grade corporate loan exposures have forced European bank lenders to tighten credit terms, while a lack of new issue collateralised loan obligations (CLOs) has exacerbated the funding shortage. The funding cliff inherent in the scheduled 2014 expiration of both the European Central Banks (ECB) Long-Term-Repurchase Operations (LTROs) and legacy CLO re-investment periods may leave leveraged credits without viable refinancing options. Debt Remains High: Since Q410, about 45% of Fitch-rated debt maturing over 2013-2015 has been pushed-out ¡ corresponding to around EUR70bn. Despite efforts made by a number of companies to extend debt maturities during 2011-2012 via amend-and-extend transactions (A&E) and high-yield bond issuance, the total debt falling due in the period 2013-2015 remains high relative to the amount of new finance recently provided by the primary markets. Fitch expects approximately...

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