Q2 has been uncertain for borrowers, lenders, issuers and investors with the continuing euro-zone debt crisis and renewed economic doubts restricting supply in the debt capital markets and dampening the demand for new lending.
UK corporate lending was therefore relatively quiet in Q2 with borrowers and lenders alike waiting for the outcome of the UK’s general election and emergency budget. There has been a steady flow of new Leveraged Buyout (LBO) deals over the last six months, but we should not forget activity levels are the lowest since the late 1990’s.
On the debt restructuring front, payment defaults and new formal restructuring discussions are substantially lower than a year ago, covenant resets less so. This perhaps indicates we are through the worst of the restructuring cycle. However, whilst the maturity wall continues to be chipped away by new bond and leveraged loan issuance, we still expect that a significant pool of the more highly leveraged borrowers will require formal restructuring to address their gearing issues.
Simon Boadle, head of the Debt Advisory team comments, “Overall the debt markets look set for a quiet summer and only by the end of Q3 will a clearer – and hopefully more positive – longer-term picture begin to emerge.”
For further info consult the Debt Markets Update – Summer 2010 from our UK colleagues