Leveraged loans are floating-rate debt instruments issued to private, sub-investment grade companies, typically made to help finance M&A activity such as leveraged buyouts by private equity sponsors.
The addressable loan market in Europe for an established manager has around 300 issuers and is approximately €300 billion1 in size, a similar scale to Europe’s high yield bond market.
In Europe, they occupy the space between liquid public bonds and illiquid private debt. Lenders receive private information from issuers, but there is an active secondary market and so there is greater liquidity than for most private debt.
1 Source: Institutional loan market size based on estimates made by M&G Investments, as at 31 March 2018