Debt Market Update: Q4 2016 | KPMG | AU

Debt Market Update: Q4 2016

Debt Market Update: Q4 2016

The calendar year of 2016 experienced a drop of 14 percent in syndicated loan market volume to US$68.5b compared to 2015. Q4 2016 fared better, with a 32 percent increase in volumes to US$29.3b, representing a $7b increase compared to the corresponding period last year. An increase in M&A activity and higher capital expenditure have driven the increase in volume in the market.

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Debt Market Update

Notable transactions include the leveraged buyout of Genesis Care, Australia’s biggest cancer and cardiac services provider (by Macquarie and China Resource), for A$790m, which closed in November 2016 with 17 lenders joining the syndicate term facility. Woolworths also refinanced with over 30 banks committing to the A$700m deal (upsized from A$500m).

Pricing remained consistent with their prior A$2b issuance which closed in April 2016. The continued investment into renewable energy has seen a number of new transactions come to market, including Sapphire borrowing A$332m to develop a 270MW wind farm.

Key themes

  • Australian bank debt market – Acceleration in M&A activity through the second half of 2016, however total volumes were down for calendar year 2016.
  • US private placement market – favourable market conditions for issuers as money flows into floating rate debt causing spreads to contract.
  • Positive outlook for 2017 – with M&A activity, infrastructure to continue to drive loan volumes.

Australian syndicated loan volume

Source: Loan Connector (data extracted January 2017), KPMG Analysis

Australian syndicated loan volume, LTM by sector (US$b)

Source: Loan Connector (data extracted January 2017), KPMG Analysis

Debt Market Quarterly Update

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