Partners Apostolos Gkoutzinis and Suhrud Mehta Comment in Debtwire on Outlook of Leveraged Loan Market Second Half of 2018

London-based European Leveraged Finance partners Apostolos Gkoutzinis and Suhrud Mehta, were recently quoted in a Debtwire article titled “From Hot Summer To Autumn: Levfin Origination Market Set For Calmer 2h18.” The article discusses the outlook of the second half of the leveraged loan market.

The article notes that while activity levels are still high, the market is showing the first signs of slowing down. The volume of loans and bonds issued have both decreased as compared to the first half of 2017. Mr. Gkoutzinis noted: “the bonanza of the last three-four years is not coming to an end, but the tune is starting to change – a bit gentler, a bit more thoughtful.” He also commented "all of that, in the summer 2018, is beginning to slow down as technical central bank liquidity is starting to dry up and fixed income investors are more worried about protecting their capital, thus being perfectly comfortable avoiding some deals, than investing in new assets, whatever the offered terms.” Some deals were pulled from the market during the first half of 2018, as investors became more selective. Mr. Gkoutzinis stated “the top-tier sponsors for the right high-quality deals still manage to get the terms they always liked. That is not changing. What is changing is the risk/reward perception, as investors become more selective, peripherally, on the more difficult transactions.”

The second half of 2018 is expected to be quieter, but still active. Mr. Mehta noted: “One of the reasons why 2018 could end with lower volumes than 2017 is that the M&A pipeline, as far as people can see now, is looking thinner.” However, the positive trend of corporate carve-outs in various industries is here to stay. Mr. Mehta also commented “we’ve seen pharma, industrial, packaging, chemicals carve-outs, there has been a whole string of deals. And so the questions now is – what’s in the pipeline? And sometimes the sellers that are not here today will be created tomorrow, because of global M&A.”