United States

KPMG Capital Advisory Q1 2014 Credit Markets Update

Apr 17, 2014
From the Advisory Institute

KPMG's Capital Advisory Q1 2014 Credit Markets Quarterly Update provides a look at Q1, including a general overview, trends, pricing and structures.

Key insights for Q1 2014 credit markets include:

  • The leveraged loan market has continued its record pace set in 2013 with $161.8 billion of loan volume during Q1 2014, a 27.7% increase over Q4 2013 volume of $126.7 billion, propelled by refinancing and M&A activity.
    • Refinancing activity reached $86.7 billion, up from $62.3 billion during Q4 2013.
    • M&A leveraged loan volume reached a post-2007 high of $66.0 billion, a 41.0% increase over fourth quarter's volume of $46.8 billion.
    • Private equity sponsors accounted for essentially all dividend loan volume during Q1 2014. In total, $16.9 billion in dividend-related recap loans closed between January and March, the largest sum since Q2 2013 and up from $9.9 billion during Q4 2013.
  • The second-lien market continues to be robust driven largely by recap activity. Issuers printed $11.3 billion of second-lien loan during Q1 2014, the second-largest quarterly total on record behind only Q2 2007 at $14.0 billion.
  • Commercial banks continue to work through regulatory uncertainty as enhanced capital adequacy guidelines are working their way through credit committees and eventual underwriting policies.
    • Non-bank capital providers have increased their risk tolerance, with some accepting total leverage over 5.5x, while they see an opportunity to pick up deals that banks are rejecting due to regulatory concerns.
    • Non-bank commercial lenders, finance companies and BDCs are providing the greatest liquidity, especially in the middle market, as the commercial banks take a harder underwriting stance.
  • CLO issuance decreased 9.3% to $22.3 billion during Q1 2014, from $24.6 billion during Q4 2013. Much of the slowdown can be traced to uncertainty regarding bank ownerships of CLOs.
    • However the CLO community is in the midst of digesting a recent announcement by the Federal Reserve that grants banking entities two one-year extensions to the conformance period under the Volker Rule, to July 12, 2017. That would give banks two more years to comply with restrictions on bank ownership interests in covered CLOs.


For further details, read KPMG Capital Advisory Q1 2014 Credit Markets Update.


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Phil Isom

Philip Isom
Head of U.S. Corporate Finance