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Laxman Pai, Opalesque Asia:

European leveraged finance issuance dropped in the first quarter as the coronavirus pandemic hit markets, leading to a 15.3% fall in accumulated proceeds, said a study.

According to Association for Financial Markets in Europe (AFME), total accumulated proceeds across European leveraged loans and high-yield bonds were €68 billion ($76.5 billion) for the three months ended March 31, down from €80.3 billion in the fourth quarter 2019.

However, it has shown an increase from €46.4 billion in 1Q'19. This quarterly decrease was driven mainly by a decrease in leveraged loan issuance.

The high yield bond share of leveraged finance market issuance increased to 43% in 1Q'20, up from 42.3% in 4Q'19 and 36.9% in 1Q'19.

"The corporate sector is facing unprecedented pressure as a consequence of the economic restrictions imposed to stop the spread of the COVID-19 virus," said the report.

Markets have priced some degree of stress and credit losses in the corporate bond and loan markets.

European high yield spreads rose from 300bps in January 2020 to a maximum of 866bps at the end of March. Most recently, however, high yield spreads have declined to c500bps in early-June 2020. The markets also priced some degree of elevated stress in the leveraged loan market. European leveraged loan prices declined roughly 20 percent with partial recovery.

95% of Moody's European corporate actions in 1Q'20 were downgraded (76 to 4 upgrades), reflecting the......................

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