Review – Q1 2018: Aeolus kept on supporting the syndicated loan market for Western European Corporates*

with favorable winds and pushed the volume in Q1 2018 to EUR 129 billion (graph 2)

representing the third best Q1 volume in the last decade. The flip side of Aeolus Janus head

(those of you familiar with ancient methodology will notice the wink of mixing a Greek God

with a Roman God but we wanted to stay in Europe with our metaphor rather than

introducing the Asian Yin-Yang especially as Janus is also concerned with travelling, trading

and shipping which closes our overall metaphor) is that this volume is EUR 26 billion below

the previous Q1 and honestly that comparison counts most and leaves a rather unpleasant

aftertaste.

Unfortunately Janus is not a single hitter as he also explains the gap: Yes, the White Knight is

there as acquisition financing accounts for EUR 48 billion in Q1 2018, representing 37% of the

total quarterly volume (graph 4), the record share in the last decade (we admit that this

comparison is limping as we compare a quarterly value with annual values but never mind).

But it is EUR 22 billion below Q1 2017 as there is only one Jumbo transaction (EUR 10.5 billion

for GlaxoSmithKline acquiring Novartis) compared to two in the previous year Q1 (EUR 23.5

for BAT and EUR 19.9 for Reckitt Benckiser).

And Janus strikes again. While the overall market in Western Europe is quite positive, the

syndicated loan market for German Corporates* is very disappointing with only EUR 11billion

(graph 1), down from EUR 14 billion (-21% compared to -17% in Western Europe). Together

with Q1 2016, this is the worst Q1 volume in the last decade in Germany. Consequently the

share of the German market in the overall market slumped to 8.3% (compared to an average

share of 20% since 2009) but due to Janus sunny face (barely) made it into the Top 5 (average

rank 2.3).

1

Source: Dealogic

3 Corporates* Germany: volume

4 Corporates* Western European: volume

Source: Dealogic

* excluding deal us of proceeds “aircraft, mortgage, shipping, PF, LBO, property”

2016

37

94

118

14

19

25

33

EUR bn

2018 2017

167

11

195

50

45

80

14

127

204 13

2015

181 105

16

21

2014

20

45

17 11

19

Nicht aktuell

1.028

191

209

129

620

2014

514

2017

91

2016

891

136

133

155 129 91

2015

102

95

157

166 170

693

115

900 469

121

251 1.061

EUR bn

2018

150

Nicht aktuell

aktuell

aktuell

Syndicated Loan Market for Western European Corporates*

2018 Q1 Review and Outlook + + + Janus Head + + +

Q1

Q2

transactions

Q3

Q4

Consequently the distribution of volume classes differs substantially between the different

national markets (graph 3). As Germany is dominated by rather small transactions (48% of all

German transactions exhibit a volume up to EUR 200m), the other major Western European

markets are dominated by transactions of at least EUR 500m (UK = 53% with a share of Jumbo

transactions of at least EUR 1 billion = 47%; Italy = 50%; France = 40%). Is the pattern good

news or bad news for the German market? Well, as already stated previously, it is good news.

It demonstrates the broad basis of the German market and its solid grounding also with the

SME companies. The EUR 3 billion refinancing of HeidelbergCement and the EUR 2,650 million

for Vonovias acquiring BUWOG AG, both in January 2018, clearly show that German

borrowers may raise larger amounts if needed. The dominance of large transactions in the UK

shows the willingness and ability of banks to provide fresh money for large acquisitions.

Outlook:

It will be interesting to see whether the predicted decline in refinancing volume (compare our

Q4 2017 Quarterly Review) will finally materialize in 2018. The first signs (graph 4) indicate

that we (unfortunately) will be right but we will keep you posted.

In general the data basis in Q1 is thin so that is not possible to determine whether any “new”

pattern prevails or will end as a mayfly. However we are sure that there will be no substantial

change in the maturity profile with 5 year maturity being the market standard, especially for

Investment Grade Companies. However the increasing importance of longer maturities needs

to be observed, too. Q1 2018 developments with Amend & Extend (substantially increased

share of refinancing volume), Extension Options (constant level) as well as Financing Mix

(increased bond financing in Germany continues) and Sector Mix (e.g. raise of Real Estate,

establishment of Retail) need to be observed.

2

Syndicated Loan Market for Western European Corporates*

Source: Dealogic (basis = No. of transactions)

3 Corporates* Western European: volume classes by countries

4 Corporates* Western European: Use of proceeds

Source: Dealogic

* excluding deal use of proceeds “aircraft, mortgage, shipping, PF, LBO, property”

Nicht aktuell

Nicht aktuell

aktuell

aktuell

100

0

50

75

25

%

<= 100 < = 200 <= 1.000 <= 500 > 1.000

GER UK FRA WE ITA

30

2014

193

(28%)

390

(56%)

2018

EUR bn

129

70

(54%)

48

(37%)

3

8

2017

514

324

(63%)

152

(30%)

26 12

2016

469

264

(56%)

148

(32%)

37 19

2015

693

78 620

387

(62%)

132

(21%)

76

25

refinancing

acquisition

rest

general corporate

Contacts Syndication

Head of Loan Syndication Thomas Haas +49 89 2171 25069 thomas.haas@bayernlb.de

3

Recent BayernLB Mandates

This document is directed exclusively to professional market counterparties and professional clients, but not to private clients. This presentation has been prepared by Bayerische Landesbank ("BayernLB ") and is intended for information and discussion purposes only. Nothing in this document constitutes an offer, invitation or recommendation to enter into any transaction nor gives rise to any obligation on the part of BayernLB or any of its affiliates. Nothing in this presentation is, or should be relied on as, a warranty or representation as to future developments or should be considered as legal, tax or economic advice or recommendation. This presentation (or any part thereof) shall not be amended or distributed. Distribution of this document into certain countries, including the US, may be subject to legal restrictions. Any person coming into possession of this document shall be obliged to inform itself in respect of any restrictions and to adhere to such restrictions. This presentation is to be treated as strictly confidential. BayernLB shall not be responsible or liable to any person or entity for any damages or loss that may be alleged as a result of this presentation. BayernLB is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervising Authority)

London Chris Linnane +44 20 7955 5109 chris.linnane@bayernlb.co.uk

New York Rolf Siebert +1 212 310 9947 rsiebert@bayernlbny.com

February 2018

GasLINE,

Straelen

Syndicated Loan

EUR 90 m

Bookrunner,

Mandated Lead Arranger

January 2018

HeidelbergCement AG,

Heidelberg

Syndicated Loan

EUR 3 bn

Bookrunner,

Mandated Lead Arranger

April 2018

Reinhard Wolf GmbH & Co.

KG, Schwandorf

Syndicated Loan

EUR 3 bn

Bookrunner,

Mandated Lead Arranger,

Sicherheitenagent

December 2017

Westfälische Drahtindu-

strie GmbH, Hamm

Syndicated Loan

EUR 70 m

Bookrunner,

Mandated Lead Arranger

October 2017

Freenet AG,

Büdelsdorf

Syndicated Loan

EUR 710 m

Bookrunner,

Mandated Lead Arranger

September 2017

Südwestdeutsche

Medienholding, Stuttgart

Syndicated Loan

EUR 350 m

Bookrunner,

Mandated Lead Arranger

August 2017

Hochtief Aktien-

gesellschaft, Essen

Syndicated Loan

EUR 1.700 m

Bookrunner,

Mandated Lead Arranger