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Lack of Confidence Holding Back M&A and LBO Growth

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Transactions such as KKR's Walgreen's 45% acquisition of Alliance Boots for $6.7 billion are quite rare.

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The leveraged finance new issuance continues to stay intact. We've had $167 billion of high yield bonds and $117 bllion of institutional leveraged loans issued so far this year. JPMorgan is forecasting lighter volume for the second half, but still decent amount of activity - see chart below.


Source: JPMorgan

Click to enlarge

The use of proceeds, however shows caution, with the bulk of new issuance going toward refinancing (at ridiculously low rates) as well as capex. LBO and even M&A activity is still subdued. Transactions such as KKR's Walgreen's (WAG) 45% acquisition of Alliance Boots for $6.7 billion are quite rare. Leveraged transactions require confidence in earnings growth/stability. And right now confidence is one ingredient that is missing, which holding back new deals.



Source: Morgan Stanley

Twitter: @SoberLook
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