Monthly European Loan Market Update - November 2021

The Credit Suisse Western European Leveraged Loan Index (“CS WELLI” or “Index”) returned 0.15% this month, generated by a principal return of -0.18% and interest return of 0.33%.1
Year-to-date (“YTD”) total returns are 4.20%.1
During the month, market focus moved back to the increase in Covid-19 cases across Europe. Several Governments re-introduced ‘soft’ restrictions and the need for vaccination passports for many activities. Austria introduced a twenty-day lockdown that closed restaurants and non-essential shops and allowed social mobility for a limited number of reasons. Covid-19 vaccines have been made mandatory – drawing interest of several other European leaders.
In the last week of the month headlines were dominated by news of a new Covid variant named ‘Omicron’. Initial data suggests that it may spread faster although causing less severe illness. Data is thin and uncertain, including the potential of ‘Omicron’ evading current vaccines. This led to a risk-off tone across markets. Furthermore, Euro Area (“EA”) inflation was recorded at 4.9% - the highest since the Euro was introduced – and putting some pressure on the ECB to review its policy of ultra-low interest rates. The Europe Stoxx 600 was down 2.6%, during the month.2
The European leveraged loan market showed resilience given the broad macro developments.
New issue volumes remained strong at €7.9 billion more than double the amount the same period last year. This brings year-to-date volumes to €111 billion – an all-time high.
Average new issue spreads are Euribor (plus a 0% floor) + 407bps, down c. 0.1% since October but around 0.35% higher versus intra-year lows reached in the first quarter. At the end of the month new issue spreads widened due to the Omicron-induced volatility.
While the pipeline (forward calendar of expected deals) remains strong we believe there will be limited scope for new deal launches in December as arrangers wait for more favorable market conditions in the new year.
CLO markets painted a similar picture: new issue activity came in at €4.3 billion – more than double the same amount during November 2020 – and bringing year-to-date issuance to €35.4bn, 10% ahead of the all-time high set in 2007.
AAA liabilities widened slightly this month, however pricing remains below the 100bps mark. Omicron related volatility is likely to slow-down new issue activity heading into the new year.
The CS WELLI’s nominal value was €371bn at month end, up by 16% YTD.1
^1. Credit Suisse Western European Leveraged Loan Index (CS WELLI) in EUR as of November 30, 2021. Past performance is not a guide to future returns. An investment cannot be made directly in an index.
^2. STOXX Europe 600Index and S&P 500Index as of November 30,2021, respectively. TheSTOXX Europe 600Index has a fixednumber of 600componentsrepresenting large, midand small capitalizationcompanies among 17European countries,covering approximately90% of the free-floatmarket capitalization ofthe European stockmarket (not limited tothe Eurozone). The S&P500 Index is a stockmarket index thatmeasures the stockperformance of 500large companies listedon stock exchanges in the United States.