RLPC-EMEA syndicated loans reach $813 bln in first nine months-data


LONDON, Sept 30 (Reuters) - Syndicated lending in Europe, the Middle East and Africa (EMEA) was up 18 percent year-on-year to $812.6 billion in the first nine months of 2014, the highest volume total since 2007, Thomson Reuters LPC data shows.

The loan market has been buoyed by the return of large-scale merger and acquisition financing, with over $122.8 billion of loans backing acquisitions completed year-to-date, outstripping all full-year M&A totals since 2008.

With over $50 billion of underwritten acquisition related financings still to be completed, and with the potential for more deals to emerge, 2014 is already the strongest year for M&A loans since the financial crisis.

"The thing about M&A is that it tends to have a snowball effect. Companies see what other companies are doing and decide to do something themselves. M&A generates a lot of business all around," a senior banker said.

Despite the pick-up in M&A, refinancing remains the main driver of lending activity making up nearly 75 percent of market volume. The availability of cheaply priced credit facilities continues to see Europe's top companies make an early return to the market to replace existing facilities on better terms.

Year-to-date refinancing volume of $608.6 billion was nearly 30 percent higher than the $468.9 billion over the same period in 2013 and is approaching the $644.7 billion full-year 2013 total.

Loan volumes in Central and Eastern Europe, Middle East and Africa (CEEMEA) fell around 34 percent to $103.4 billion for the first three quarters of 2014 compared to the first nine months of 2013, triggered by the effective closure of the Russian loan market since March as a consequence of the geopolitical fallout over the Kremlin's annexation of the Crimea.

After three rounds of US and European sanctions against Russia, the country's loan market -- normally the biggest in CEEMEA -- has ground to a halt with bankers predicting a return of the market as a 2015 event. As a result, deal volume in Russia nosedived by around 73 percent to $11.1 billion year-to-date, compared to $40.4 billion for the first three quarters of 2013. MORE SELECTIVE Investment-grade lending to Europe's higher-rated companies rose 38 percent in the first nine months of 2014 to $520 billion, with high-grade M&A loans rocketing 112 percent to $66.4 billion on last year's $31.3 billion as a series of large-scale cross-border acquisitions took place.

High-grade refinancing volume increased 46 percent in the over the first three-quarters to $423 billion as corporate continued to take advantage of low loan pricing to return to the market to refinance credit facilities at low rates or to reprice existing deals through amend and extend transactions.

Fierce competition between banks to win loan mandates and gain access to money-spinning ancillary business has kept investment-grade loan pricing low across Europe's stronger economies. But with the increase in deal flow and volumes seen in 2014, loan pricing has stabilised and may come under upward pressure if market volumes remain high.

"With the boost in volumes, banks may become more selective in the deals they do. That may mean we will begin to see some pressure on pricing," a second banker said.

The third quarter's largest deals were dominated by M&A financings. The largest deal of the quarter was Imperial Tobacco's $13.1 billion loan backing its acquisition of selected brands and assets from Reynolds American Inc that completed in September. That jumbo financing covered the $7.1 billion acquisition as well as refinancing Imperial's existing core bank borrowings.

Imperial's financing was closely followed by BSkyB's 6.6 billion pound ($10.70 billion) acquisition financing backing its purchase of Sky Italia and Sky Deutschland from Rupert Murdoch's 21st Century Fox. Meanwhile, Swiss travel retailer Dufry backed its acquisition of duty free and travel retail group Nuance with a total of 4 billion Swiss francs ($4.18 billion) of loans comprising a 1.6 billion Swiss franc bridge loan and a 2.4 billion Swiss franc-equivalent loan refinancing backstop line.

SEVEN-YEAR HIGH Leveraged loan volume of $149.6 billion for the first three quarters is the highest level since 2007 and is on course to surpass total 2013 volume of $191.5 billion, driven by both refinancing and an increase in M&A activity.

Totalling $104.6 billion, the majority of leveraged loans have been for refinancing, as borrowers sought to achieve better terms on deals. Value was also extracted from companies through dividend recapitalisations.

Event-driven financings are also on the rise, with leveraged buyout volume totalling $25.26 billion year-to-date and on course to beat 2013's $28.7 billion total.

Despite the dominance of refinancing activity, the three largest leveraged loans of the third quarter were M&A-related.

The largest was a $9.2 billion loan for Jacobs Douwe Egberts that refinanced debt and funded a merger between DE Master Blenders' coffee business and Mondelez, followed by a 2.15 billion euro ($2.71 billion) loan backing private equity firm CVC's acquisition of a stake in Spanish hospital group Quiron and a 1.075 billion euro financing backing the takeover of French healthcare firm Generale de Sante .

An anticipated increase in buyout and corporate leveraged M&A activity is expected to materialise in the fourth quarter, which will help to soak up high levels of liquidity from new CLOs and credit funds and sate banks appetite to underwrite new deals.

"We had a blow-out July but nothing much really happened in August or September. Whenever the market gets quiet it prompts refinancings, repricings and recapitalisations. We have had some M&A activity so far this year and there is likely to be a lot more M&A in the fourth quarter which could drive a lot more loan volume. The uncertainty is whether the assets for sale will go to trade or to sponsors and leveraged corporates," a loan syndicate head said.

Some big deals in the pipeline include around 2.8 billion euros of debt financing to back the potential sale of SIG Combibloc Group, the world's second largest maker of drink cartons and around 600 million euros in debt financing for Germany's largest private sector chain of health rehabilitation clinics Median Kliniken.

BNP Paribas leads the EMEA syndicated loan bookrunner table after nine months with a $44.9 billion share of the market via 183 deals. Credit Agricole CIB is second with $28.6 billion share of the market from 122 deals, while HSBC is third with a $28.2 billion market share from 158 deals. (1 US dollar = 0.6168 British pound) (1 US dollar = 0.9560 Swiss franc) (1 US dollar = 0.7923 euro)