The mood was decidedly optimistic at BNP Paribas’ 21st Annual High Yield & Leveraged Finance Conference, which was held on 23 January 2025 in London. Following a strong 2024, with leverage loan issuance surpassing 2021 and high yield not far behind, expectations for 2025 are high.
However, amidst the enthusiasm, there was a consensus that the market needs more M&A activity to meet these ambitions, despite ongoing uncertainty surrounding major global issues, both political and economic.
According to Renaud-Franck Falce, Head of Global Capital Markets at BNP Paribas, the event was a fantastic opportunity to share and gain insight into current trends and developments in the leveraged finance credit markets – term loan B (TLB) refinancings and repricings, the hunt for new money supply supported by M&A or dividend recaps, and again full focus on rates.
“Most importantly, we are together today to exchange, to network, to share perspectives. This is our overarching goal: bringing together our issuer and investor clients,” added Falce.
❝ Most importantly, we are together today to exchange, to network, to share perspectives. This is our overarching goal: bringing together our issuer and investor clients. ❞
The conference, which drew over 1,400 participants, provides the leading platform for buyside attendees to connect with private equity and European and US issuers. Panel debates delved into key themes from across the leveraged finance space, covering collateralised loan obligation (CLO) issuance, the robust syndicated market, M&A and cross-border activity.
Key takeaways on credit outlook in 2025
- The global market is affected by known unknowns but also unknown unknowns which usually are the big volatility events. We are currently mid cycle, with a small risk of the US going into recession.
- The biggest risk factor going forward is a rate shock. If the cuts expected are removed, it could be positive for the market if for the right reasons (and higher yields are good for markets).
- Credit spreads are tight but compared to historic periods yields are high, which is the factor attracting demand into the asset class and is good for credit.
- In terms of supply, the increase in high yield supply last year was driven by corporate spending in a positive earnings cycle and M&A financing. However net funding is negative.
- Private debt remains a permanent fixture and continues to print an increasing number of deals.
- The leveraged finance maturity wall improved but still needs to be tackled – the share of debt due in next two years higher than in past.
“The political headlines may scream uncertainty and volatility but the factors that normally drive credit markets – supply and demand as well as the broader fundamental trends – are suggesting things might be surprisingly stable,” said Viktor Hjort, Global Head of Credit Strategy and Desk Analyst at BNP Paribas Global Markets.
❝ The political headlines may scream uncertainty and volatility but the factors that normally drive credit markets – supply and demand as well as the broader fundamental trends – are suggesting things might be surprisingly stable. ❞
Key themes on leveraged finance in 2025
- Leveraged finance as an asset class remains strong and in demand. Despite political challenges, markets are solid and the cost of capital has tightened.
- There is a continued need to demonstrate the circulation of capital from fund raising, through deployment and return to sponsor limited partners.
- The delta between direct lending and broadly syndicated markets has widened with clear cost savings for issuers.
- Although fundamentals in the US are stronger, European spreads can still present a great opportunity for investors.
- Floating rate products (TLB and floating rate note) are favoured over fixed, with the call structure providing critical flexibility to sponsors.
Charlotte Conlan, Vice Chair of Global Leveraged Finance, Global Capital Markets at BNP Paribas, underlined the positive tone coming from market participants at the conference. “We have seen 2025 start in a very robust way. The demand for leveraged credit is strong – we can see that in the terms being achieved by our issuer clients. The M&A theme returned again and again, and importantly the sentiment around the ability to deploy capital was encouraging despite the geopolitical and geoeconomic backdrop remaining in front of mind for our clients and ourselves,” said Conlan.
She added, “BNP Paribas is expertly positioned to help clients navigate this evolving landscape in the pursuit of growth.”
❝ We have seen 2025 start in a very robust way. The demand for leveraged credit is strong – we can see that in the terms being achieved by our issuer clients. The M&A theme returned again and again, and importantly the sentiment around the ability to deploy capital was encouraging despite the geopolitical and geoeconomic backdrop remaining in front of mind for our clients and ourselves. ❞
By bringing together its issuer and institutional clients, BNP Paribas provides a unique forum for connection and insight into the credit-relevant issues of the day. As a leading player in the leveraged finance space, BNP Paribas is committed to delivering exceptional service and expertise to its clients, helping them achieve their goals in an increasingly complex market.
