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Markets Update: European Leveraged Capital Markets

2020-09-11

Dominic Ashcroft and Luke Gillam, co-heads of EMEA Leveraged Capital Markets in Goldman Sachs’ Investment Banking Division, talk about the “cautiously optimistic” sentiment among corporate clients. 

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Welcome to our exchanges. Goldman Sachs markets update for Fridays Terminal lemon each week we check in with these cross the firm together we take a what they're watching in markets objects, were global, had, of course, communications in joining us today we have Dominic Ashcroft Immune from our investment banking division in London. Dominic is coherent, mere leverage capital markets which covers the sub, That's grade loan in Bonn products and look is go ahead of me: a leverage, capital markets and culture of credit markets, Capital Committee, when the programme diamond look, I seriously so you're teams hosted the emir lengthened conference remotely course. Earlier this week coming how'd. You described sentiment right now towards European Non investment, great credit markets in what striving investors at the moment
the two you have to start after we had about one and a half thousand flights at ten o clock confidant cheese day, and it was a great way to cancer through some of the main topics either. We think irrelevant to both the broader markets, but also yes, pacifically the suburb s great space today, painters over all set about his Polly best described ass, cautiously optimistic, majestic and a pin buy you a couple of factors that I was gonna get through. I firstly, or was it a huge mobilization of liquidity within the set the banking system here, which, from the beginning of the crisis, is help. Protect us against, would be a more systemic, your loss of confidence from the markets and, although the some of us, a great market as body only seen a small amount of liquidity, there's been predominate, directed to set a fallen angels. Yours underpaid and yet it s a great market, an and bite liquidity. Your generally, which I think is at your help, the overall credit mocking setting us the first reason Secondly, the other governments support that we ve seen coming into the economies has been pretty much
precedent it. Yet we witness your large fiscal supports. Channel into economies from a european perspective has probably been. Your programme we focused on the labour markets. Yes, that supporting employment and then the additional issues where the government guarantee schemes those have been used pain, balance sheets and provide liquidity. He had yet to capital structures, which They can access about you too simple, restructuring and distress. Situations yes come through at last helped you. Company stubbornly planting is also helped. Your sentiment, you're in the market Thirdly, a more than Microsoft corporate level firms. You're, really quick to react and could cause reopen change their supply chain. panes and so make themselves more efficient, and hopefully I need. This is one of the things that investors are hoping that when the economy stocks recover yours, he cut
these are in leaner about a shape to them recover. Lastly, the market itself. We came into the crisis. We actually relatively limited amounts of your underwritten deals on balance sheets with the banks. Most of it balance sheet exposure has now been orderly placed in the market, and so yeah most of investor communities. Looking at the forward pipeline of deals, I have seen a huge amount of supply and as weak as we ve seen in financial markets was flies limited and we continue to see demand as normally a good condition here for favourable. Your marked dishes and I as we have seen today, and I certainly what we and many other participants in the conference anticipate the market continue to look like in September into out into the interview the down for that look. The strength of the credit market And in the speed and the recovery has been pretty standing across the board,
What is it similar across the different european markets? In other, any notable differences with the UK and breaks it looming just give us a sense of the landscape across Europe, so nice we see these strong market conditions as broad based across european markets. So we don't see material differentiation across countries within the EU, and I think it's probably had to say there's not a huge amount differentiation between the sterling, the euro market or, to put it another way, its bright broadbased recovery and market conditions for issues are constructive, pretty much across the peace so. If we look within the EU historically has been concerns about core countries versus peripheral countries and peripheral countries seems If we can risk premium, I would say that that is not stopped. The agenda can see that a little bit between differentials bones and and pity peace, which is still about a hundred fifty basis points Bert,
coming down during the year. I would say: investors are much more focused about credit rating. Then the country of operations and the impact the particular covered is having on credit and ask for your phone, is not also worth saying that investors across markets you have in pretty open minded in supporting companies that, through the crisis, you have significant operational issues relating to covered. If I look at the differences between sterling and euro. Again, I sought to reiterate the both markets are strong and both markets retracted, issues. There are some nuances here, so it is fair to say that sterling spreads. Ah, overall, slightly higher than yours, spreads as a pretty good example of this. So we ve just been in the market. But corner on a transaction for virgin media. It's a large deal. It's fucked seven billion pounds is related to the margin. They too and is interesting,
because they ve access or free market, so euros sterling and dollars all together. And you compare the two. how'd it go shows you is the sterling spread, sunny subversion, meteor, twenty five to thirty seven harpist points: why did the nearest spread so was driving at premium? You could argue expressed here. I'd also argue that study market being a little bit of a smaller, less liquid marks and Spencer always been cited higher. I didn't you was actually conclude the reverse and breaks it, which is despite the looming issues related to break set the recent a significant observable breaks. It was praying in the sterling market and the study market has been functioning pretty well and staying markets being supporting companies impact by covered. So good example of this is this week: source and box issue assent about being a leisure part, business impact of my covered issue at six percent region We observe that transaction going well, we brought to trial
pre summer for company could stone Gait, which is the case largest pop estate. Nosey pops up the challenges and study market, a sporting that transaction in good sized, citing in conclusion, naughty huge about difference, but also in Europe is between between market, how does the european credit environment compared what we see in the? U S talk about the relative value between geographies and how investors are thinking that sir. My answer to you is what Europe is a little bit similar to. The first question, which is both markets have recovered very ones crisis. Those markets are looking very technically strong at the moment, but there again is a little bag nuance between the two. double be Euro spreads, are slightly tasted and double be. You spreads, as I see the inverse as you go down the road spectrum, so It will be your spreads our tighter, then single EU experts so at the far end of the credit spectrum, Europe seems to be
for. We know that a lower and inspection- U S, seems to be out for me- little bit does allow reasons for, I think so. The simplest reason for the tighter double be yours prices. The impact of the easy Bay today has been buying significant percentage of new issue in investment guide, and what I ve done is a crowded. The not invest in great buys down into that better course. He spectrum in some. Much greater in stubble be, and we see that Non EU issue. We did a new issue a couple weeks ago, four dolby european jobs, the estimated summing up deep sense of the book, was invested goodbye so that one simple explanation: if you look at this great low markets. Again, I would say that place of those markets have recovered relative. We in unison. I would say that we are starting to see what I might call more aggressive activity coming out of Europe which is setting aside a: U S more strength versus the? U S so we started
the city. First sponsors doing dividend drink applications which had been pretty much off the table during the early part of the crisis, We haven't seen that sort of activity in Europe so far, and I'm not expecting a huge wave of that in the short term, possibly a little bit further out. have seen little bit more aggressive activity in the US and is also fair to say that the Eu S is a much bigger overall credit market. I'd say you do see more diversity of activity in Europe being a little bit slower to get going. I saw my soul, hardly go through an entire progress without talking about yes, she said: Dominic count them chain or not changed, the demand for more skin is cheap products and investment opportunities. What's the outlook over the medium term, is very topical, remains highly topical, said. She'd folks, omens yet to deal with issues focused a b. The other markets,
I think it was clear we had a couple panels at a conference that, yes g here is not so is going away and I gather brought to market yours, on. An attic is grappling your with how it can affect says cultural change. The market in terms of trying to change the way people consider your environmental, social and instead of governance, that your shoes, That change is driven by the regulator. Landscape near petition from a european perspective probably most seen on the ear. Yes gee. I look at environmental issues, so the taxonomy that the EU has been brought in, our cities The Paris club is called, the people are starting to your gear. Up for that war, you start from becoming entrenched twenty one in terms of the targets but he also social governance theme. Yet I also said a top of mind. I'm in the areas that we ve been trying to focus on four practical perspective is helping market participants at me get information you're from corporate and issues that will bring the markets. At least they can make a judgement you're on
the energy related factors, and so either play being chair of the eye of association or from a european perspective. Yet we brought out a day. the June list requested Airless another alone this year, a little bit delayed by the pandemic influenza you're, just coordinating and getting a bit effect. I liked it all, but that came out in in July, the investor association which is alpha witches representation of a lot of the lavish finance investors that operate in the market has also come up the questioner that I really Jonathan This issue is on your providing additional disclosure and although this the reversal of baby steps were taking. I think, ultimately, we're on a journey here yet to become more transparent and at the able to empower issuers and investors to bow to assess your marketing companies and other doing from enhanced expected look down thanks for joining us today. That's all for this week's markets update on exchange the Goldman Sachs in case you missed it check out or other types of this week,
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Transcript generated on 2021-07-03.