DEBT WATCH EUROPE 2020 ANNUAL REVIEW - PWC
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Debt Watch Europe
2020 Annual Review
pwc.co.uk/debtwatch
Review of 2020 and outlook for 2021
€859bn Overview
In the wake of a coronavirus pandemic Conversely, reduced yields led to
Total raised in 2020 (COVID-19) during 2020, European bond unfavourable terms for investors. Average
markets remained very active. 1,207 deals yield-to-maturity on issuances for BB rated
across Europe
and c.€859bn raised during 2020 surpassed bonds has decreased from 4.02% in 2019
2019 activity in terms of volume (c.€814bn to 3.50% in 2020, and for B rated bonds
raised by comparison) even though overall from 6.61% in 2019 to 5.77% in 2020.
1,207 numbers of deals were lower than 2019’s
1,305. The first two quarters of 2020 were
far more active than the latter two, though
Financial services dominated both the
high yield and investment grade markets
Total deals in 2020 activity continued throughout. Market throughout 2020; perhaps unsurprisingly
across Europe conditions drove the strong start in Q1 2020 consumer goods and services were the
and then we saw a further response in Q2 second most active sector with 21% and
2020 to COVID-19 as companies searched 15% of the markets, respectively. As one of
for liquidity to shore up their balance the most affected sectors by COVID-19, the
€699bn sheets. This was especially evident in the
investment grade markets, which showed
consumer sector saw a great deal of activity
to weather the storm as national lockdowns
and restrictions resulted in many businesses
Raised in Investment Grade heightened levels during Q2 2020 as issuers
flocked to the markets. Q2 2020 proved the needing to bolster liquidity, refinance any
deals in 2020 across Europe national state schemes that had been
slowest quarter for high yield with 42 deals
amounting to c.€35bn, due to the high yield offered or repay drawings on revolving
market’s dormant activity during March and credit facilities. The market saw deals from
€160bn
April 2020. Nonetheless, in the shadow of unexpected places with Carnival cruises
COVID-19, 2020 proved to be one of the issuing US$4bn senior secured notes in
strongest high yield bond years on record April 2020, US$900m senior secured notes
Raised in High Yield deals in terms of volumes. c.€160bn were issued, in August 2020 and c.US$2.04bn (US dollar
in 2020 across Europe behind only 2017 which saw c.€179bn equivalent) senior notes in November in
issued without the markets effectively 2020. Even while much slowed down in
shutting down. Q4 2020 high yield activity the wake of global lockdowns, the bond
saw an uptick as investor sentiment markets remained open and adapted to the
improved with news of effective vaccines. new trading environment.
Since March 2020 Keynesian central The 2020 European high yield bond
banks have continuously offered stimulus market was dominated by BB credit rated
packages to the markets, providing instruments, accounting for over 60%
unprecedented support to economies of deals. This was a consequence of the
with issuers taking advantage. The latest ‘fallen angels’ that came to light during
instalments being the European Central 2020 coupled with investors’ willingness to
Bank (ECB) adding c.€500bn to its bond buy into riskier bonds. Examples of ‘fallen
buying program in December 2020, angels’ were seen in Q4 2020 when
followed by the U.S. Federal Reserve (the Marks & Spencer and Renault issued high
Fed) adding c.US$900bn as an additional yield bonds.
stimulus package.
2 | Debt Watch Europe – 2020 Annual Review | PwC
Review of 2020 and outlook for 2021
(continued...)
Green/ESG bonds New issuers of green bonds are able to This leaves bond investors with much
expand their investor bases and attract to consider going into 2021 as they are
The European green bond market is growing
a wider audience, which is an additional squeezed out by central banks and continue
swiftly as companies search for favourable
incentive along with the credentials. 2020 to search for improved yield. Consequently,
terms and want to be seen as acting in a
saw issuers from sectors not previously investors may look to other instruments
socially responsible manner. Predictions for
seen before such as consumer goods and and markets to enhance returns on their
2021 are that as much as US$500bn could
industrials, which will in time help grow portfolios. Some of the initial excitement
be raised worldwide in the sector in 2021.
the market as investors look to diversify. around the vaccine development has
The appetite is certainly there, as investors
Burberry pioneered green bonds in the become muted as the reality of the
also have ever-increasing environmental,
fashion retail sector with an issuance mammoth task of its rollout dawns. So the
social and governance (ESG) mandates
amounting to £300m paving the way for early optimism of investors at the end of
driving demand. 2020 saw 146 green bond
many others. 2020 was checked in the first quarter of
deals amounting to c.€80bn in contrast to
2021. Generally positivity remains and, for
127 deals amounting to c.€63bn in 2019.
Outlook for 2021 the right issuer with the right story, there will
Against this, concerns remain. With no
certainly be an appetite for new deals. We
set ESG framework that all issuers need Looking ahead to 2021 and the changes
have already seen oversubscribed bonds
to follow, accusations of ‘greenwashing’ as a result of the Democrats winning the
issued in the first week of January with Wizz
and differentiation in practice have made United States presidential election and
Air receiving €2bn of orders for its €500m
benchmarking difficult. That said, new gaining control of the Senate coupled with
1.35% issue.
standards and frameworks are being continued lockdown scenarios, there are
developed to address investor concerns and likely to be further stimulus packages from
The market for issuers is expected to remain
the European Union (EU) has developed the national Governments and central banks
attractive during 2021. In spite of continued
EU taxonomy for sustainable activities. to support and balance markets into 2021
restrictions and national lockdowns due to
until the COVID-19 vaccine has been fully
COVID-19, activity is expected to remain
rolled out and stability achieved. Yields on
high. Credit default ratings could increase
Government bonds throughout Europe are
in 2021 as the COVID-19 situation evolves
very low and are expected to remain at
and as the full effects of the pandemic are
these levels for the year ahead. The rate at
reported in companies’ annual financial
which the ECB has purchased Government
statements. As 2021 progresses, the focus
bonds during 2020 is unprecedented,
may switch from refinancing to M&A and
resulting in low yields.
LBO with yields likely to be dependent on
the sector.
PwC | Debt Watch Europe – 2020 Annual Review | 3
Corporate Debt Activity
Corporate debt activity by quarter
350 400
365
300 350
302 306
265 271 300
250
Number of deals
250
Value (€bn)
200
200
150
150
100
100
132 199 113 114
50 273
50
45 43 35 38 44
0 0
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Value High Yield (HY) Value Investment Grade (IG) Number of deals
Corporate debt activity by year
1,000 1,319 1,305 1,400
1,207
900
1,057 1,200
800 1,005
700 1,000
Number of deals
600
Value (€bn)
800
500
600
400
300 400
602 699
200 662
578 540 200
100
111 179 111 152 160
0 0
2016 2017 2018 2019 2020
Value High Yield (HY) Value Investment Grade (IG) Number of deals
4 | Debt Watch Europe – 2020 Annual Review | PwC
Green/ESG Bonds
Green/ESG bonds activity by quarter*
30 60
51
25 50
32 37
20 35 40
Number of deals
26
Value (€bn)
15 30
10 20
5 10
17 18 19 26 17
0 0
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Value Number of deals
Green/ESG bonds activity by year*
90 146 160
80 127 140
70
120
60
Number of deals
100
Value (€bn)
50
80
40 59
55
60
30
32
40
20
10 20
16 32 33 63 80
0 0
2016 2017 2018 2019 2020
Value Number of deals
* Green/ESG bonds includes Social, Sustainable and Green bonds
PwC | Debt Watch Europe – 2020 Annual Review | 5
High Yield – Europe
(Rated BB+ (inclusive) and below)
HY activity by quarter HY by sector 2020
50 93 100
77 77 Basic Materials
45 90 6% 4%
40 70 80 Consumer Goods
42 10%
Number of deals
35 70 14% Consumer Services
Value (€bn)
30 60 Financials
25 50 2% 11% Health Care
20 40 3%
Industrials
15 30
Oil & Gas
10 20
13% Technology
5 45 43 35 38 44 10
0 0 Telecommunications
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 34% Utilities
3%
Value HY Number of deals
Top ten HY issues 2020
Pricing Ten largest HY issues Value Sector Listing Nationality of Credit YTM (%)
date 2020 (€m) operations rating
(S&P)
Jun-20 ThyssenKrupp Elevator AG 4,037 Industrials TISE-The International Germany B/CCC 5.97
Stock Exchange
Jun-20 Fiat Chrysler Automobiles NV 3,500 Consumer Goods Irish Stock Exchange- Italy BB+ 3.92
All Market
Jan-20 Altice Financing SA 2,774 Financials Luxembourg Stock France B 3.42
Exchange
Sep-20 VMED O2 UK Financing I plc 2,759 Telecommunications TISE-The International United Kingdom BB- 3.83
Stock Exchange
Oct-20 Rolls-Royce plc 2,199 Industrials London Stock Exchange United Kingdom BB- 5.38
Oct-20 Gaz Finance plc 2,184 Oil & Gas Irish Stock Exchange- Russian BB
All Market Federation
Jan-20 Altice France SA 2,102 Telecommunications TISE-The International France B 4.08
Stock Exchange
Sep-20 Electricite de France SA 2,081 Utilities Paris France BB- 3.25
– EDF
Oct-20 Veolia Environnement 2,000 Utilities Paris France BB+ 2.50
Aug-20 Vodafone Group plc 2,000 Telecommunications London Stock Exchange United Kingdom BB+ 2.82
HY by issuer operations nationality 2020 Average yield-to-maturity by issue rating (%)
United Kingdom
S&P rating Q4 2020 2020 2019
Italy
17%
20% Germany BB 3.50 3.70 4.02
France B 6.26 5.77 6.61
2%
Netherlands CCC - 5.91 8.95
2% 14%
3% Spain
CC 9.33 9.33 -
3% Brazil
4% Russian Federation
5% 14% Ireland
5% Sweden
11%
United States
Other
6 | Debt Watch Europe – 2020 Annual Review | PwCInvestment Grade – Europe
(Rated BBB- (inclusive) and above)
IG activity by quarter IG by sector 2020
300 323 350 3%
2% Basic Materials
250 300 3% 7%
229 Consumer Goods
12%
Number of deals
209 250 3% Consumer Services
200 195 194
Value (€bn)
200 9% Financials
150 Health Care
150
100 Industrials
100 11% Oil & Gas
50 50 Technology
132 199 273 113 114 4% Telecommunications
0 0
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Utilities
46%
Value IG Number of deals
Top ten IG issues 2020
Pricing Ten largest IG issues Value Sector Listing Nationality of Credit YTM (%)
date 2020 (€m) operations rating
(S&P)
Feb-20 LVMH 9,299 Consumer Luxembourg Stock Exchange France A+ 0.50
Goods
Nov-20 Saudi Aramco 6,702 Oil & Gas London Stock Exchange Saudi Arabia NR 2.42
Jun-20 BP Capital Markets plc 6,141 Oil & Gas London Stock Exchange United Kingdom BBB
Jul-20 Bayer AG 5,980 Health Care Luxembourg Stock Exchange Germany BBB 0.97
Feb-20 Siemens 5,004 Industrials Luxembourg Stock Exchange Germany A+ 0.34
Financieringsmaatschappij NV
Jan-20 Petroleos Mexicanos – 4,508 Oil & Gas Luxembourg Stock Exchange Mexico BBB+ 6.45
PEMEX
Mar-20 Anheuser-Busch InBev SA/NV 4,489 Consumer London Stock Exchange Belgium A- 2.92
Goods
May-20 Siemens 3,997 Industrials Luxembourg Stock Exchange Germany A+ 0.47
Financieringsmaatschappij NV
Jun-20 Upjohn Finance BV 3,600 Health Care Irish Stock Exchange- United States BBB- 1.28
All Market
Jun-20 Airbus SE 3,482 Industrials Luxembourg Stock Exchange France A 1.84
IG by issuer operations nationality 2020 Average yield-to-maturity by issue rating (%)
France
S&P rating Q4 2020 2020 2019
Germany
17% 20% United Kingdom AAA 0.02 0.64 1.94
Netherlands
Spain AA 0.29 0.84 1.02
3%
3% United States A 0.83 1.21 1.34
3% Sweden
BBB 1.46 1.86 2.01
3% 14% Italy
Canada
4%
Switzerland
4%
Finland
4% 13%
Japan
5% 7%
Other
PwC | Debt Watch Europe – 2020 Annual Review | 7UK Focus
High Yield (rated BB+ (inclusive) Investment Grade (rated BBB- (inclusive)
and below) and above)
UK HY activity by quarter UK IG activity by quarter
16 25 60 55 60
18 20
14 18 43
16 12 20 50 50
Number of deals
Number of deals
12
40 40
Value (€bn)
Value (€bn)
10 15 29 29
27
8 30 30
6 10
20 20
4
5
2 10 10
9 12 12 14 11 17 39 55 13 23
0 0 0 0
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Value HY Number of deals Value IG Number of deals
UK HY by sector 2020 UK IG by sector 2020
2% 3%
Basic Materials Basic Materials
6% Consumer Goods Consumer Goods
7%
5% Consumer Services Consumer Services
24% 21%
Financials Financials
20%
Health Care Health Care
18%
Industrials Industrials
3%
3% Technology Oil & Gas
Telecommunications 3%
Utilities
Utilities 2%
18%
18%
6% 41%
Top five UK HY issues 2020 Top five UK IG issues 2020
Pricing Top five Value Listing Credit YTM Pricing Top five Value Listing Credit YTM
date HY issues (€m) rating (%) date IG issues (€m) rating (%)
(S&P) (S&P)
Jun-20 ThyssenKrupp 4,037 TISE-The B/CCC 5.97 Nov-20 Saudi 6,702 London Stock NR 2.42
Elevator AG International Stock Aramco Exchange
Exchange
Sep-20 VMED O2 UK 2,759 TISE-The BB- 3.83 Jun-20 BP Capital 6,141 London Stock BBB
Financing I plc International Markets Exchange
Stock Exchange plc
Oct-20 Rolls-Royce 2,199 London Stock BB- 5.38 Mar-20 Anheuser- 4,489 London Stock A- 2.92
plc Exchange Busch InBev Exchange
SA/NV
Jan-20 Altice France 2,102 TISE-The B 4.08 Apr-20 BP Capital 3,250 London Stock A- 2.41
SA International Markets Exchange
Stock Exchange plc
Aug-20 Vodafone 2,000 London Stock BB+ 2.82 Apr-20 Wells Fargo 3,000 London Stock A- 1.54
Group plc Exchange & Co Exchange
8 | Debt Watch Europe – 2020 Annual Review | PwCAbout Debt Watch Europe
Debt Watch Europe surveys all main and exchange regulated market bond deal issuance across
Europe’s debt listing venues (excluding Russia and Switzerland). Previously the data was based on
the deal nationality being within certain European countries.
The survey was conducted between 1 January and 31 December 2020. All market data is sourced
from Dealogic and has not been independently verified by PricewaterhouseCoopers LLP.
Methodology
The classification of investment grade (IG) and high yield bond (HY) bonds are based solely on the
ratings given by S&P – with BBB- and above (inclusive) as IG and BB+ and below (inclusive) as HY.
Yield to maturity is calculated as an average for issues with numerous tranches as of the pricing date.
For any issue with different ratings applied to different tranches, the multiple credit ratings for such
issuances are displayed.
Sources: Dealogic, LCD, Bloomberg and PwC analysis.
PwC | Debt Watch Europe – 2020 Annual Review | 9Contacts
Sarah Hitchen
Partner, Capital Markets
M: +44 (0)7734 958782
E: sarah.l.hitchen@pwc.com
David Godbee
Partner, Debt & Capital Advisory
M: +44 (0)7740 242013
E: david.k.godbee@pwc.com
James Millar
Senior Manager, Capital Markets
M: +44 (0)7725 706184
E: millar.james@pwc.com
Dominic Griffiths
Senior Manager, Capital Markets
M: +44 (0)7483 407481
E: dominic.x.griffiths@pwc.com
10 | Debt Watch Europe – 2020 Annual Review | PwCPwC | Debt Watch Europe – 2020 Annual Review | 11
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2021 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 2021-01-08_RITM4415881
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