European Leveraged Finance Sets New Height Records
In a significant development for the European financial landscape, the leveraged finance markets have seen a surge in activity, offering crucial refinancing opportunities for highly indebted companies, particularly those owned by private equity firms.
Leading the charge is TK Elevator, a global elevator company owned by Advent and Cinven, which recently secured the world's largest term loan B of €6.3 billion. This substantial funding will undoubtedly aid in the company's ongoing operations and future growth.
Meanwhile, US battery manufacturer Clarios Global, owned by Brookfield Business Partners, secured $4.2 billion for a dividend, further highlighting the attractiveness of these markets for investors.
The increased activity in the European leveraged finance markets is not limited to large corporations. Private credit funds and non-bank financial institutions (NBFIs) have also emerged as prominent providers of long-term credit to small and medium-sized companies. Despite operating with significant leverage, these funds have played a vital role in increasing the availability of credit and liquidity.
The first half of this year has been particularly active, with the issuance volume of high-yield bonds and term loans B rising by 19% to a record €206 billion. The last week of June alone saw a record-breaking 34 transactions worth €27 billion, making it the busiest leveraged finance week ever.
Ales Mydlar, Managing Director for Leveraged Finance at J.P. Morgan, attributes this market activity to good conditions and large inflows for European Collateralised Loan Obligations (CLOs) and high-yield funds.
The growth and increased issuance in these markets provide essential refinancing channels for companies, many of which are facing maturities in the coming years. Notably, €174 billion needs to be refinanced due to maturities in 2028, while only €10 billion needs to be refinanced in 2025.
Despite the potential volatility due to the US trade dispute, Ales Mydlar believes that a large part of the refinancing needs is already covered. This confidence is reflected in the J.P. Morgan European High Yield Index, which stood at a yield of 5.97% on July 1st, a decrease from the 7.33% recorded following the announcement of US tariffs in April.
The flexibility and growth of European leveraged loans have been vital for companies needing to restructure or refinance debt, especially amid volatile economic and geopolitical conditions. This resilience is also evident in the total volume of leveraged loans issued in Europe this year, which stands at €145 billion, higher than the €117.1 billion issued in the same period of the record year 2024.
Lazard is also expanding its presence in the leveraged finance area by poaching high-ranking managers from rivals J.P. Morgan and Rothschild. A team around Katja Ksoll is being built up to establish the department for debt advisory at Lazard, further bolstering the competitive landscape.
In summary, the growth and increased issuance in European leveraged loan and high-yield markets provide essential refinancing channels for highly indebted companies, particularly private equity-owned firms. These markets are supported by a broader ecosystem of private credit funds and asset managers whose lending activity, while beneficial for refinancing, also introduces liquidity dynamics that warrant attention to financial stability.
- The surge in activity within the European leveraged finance markets has attracted global companies like TK Elevator, securing the world's largest term loan B of €6.3 billion for investing in ongoing operations and future growth.
- US battery manufacturer Clarios Global, owned by Brookfield Business Partners, also benefited from these markets, securing $4.2 billion for a dividend, demonstrating the attractiveness of these markets for finance and business.
- Small and medium-sized companies are not left behind, as private credit funds and non-bank financial institutions (NBFIs) have emerged as significant providers of long-term credit to these businesses, increasing credit and liquidity availability.
- The first half of the year witnessed a 19% increase in the issuance volume of high-yield bonds and term loans B, reaching a record €206 billion, with the last week of June alone registering 34 transactions worth €27 billion, marking the busiest leveraged finance week ever.
- The European high-yield market's growth and increased issuance offer essential refinancing channels for companies, particularly those with maturities in 2028 (€174 billion) compared to 2025 (€10 billion).
- Asset managers like J.P. Morgan, with Ales Mydlar leading the leveraged finance division, see this market activity as a result of good conditions and large inflows for European Collateralised Loan Obligations (CLOs) and high-yield funds, despite potential volatility from US trade disputes.
