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GlobalCapital Podcast

The big test for 2023 and the ECB’s inadvertent boost to private credit

- Why the good times in primary bond markets may not last - The consequences of the ECB’s demand that banks buffer their leveraged finance positions on LBOs - How that could play into the hands of private creditors

(221215) -- FRANKFURT, Dec. 15, 2022 (Xinhua) -- President of the European Central Bank (ECB) Christine Lagarde attends a press conference in Frankfurt, Germany, Dec. 15, 2022. The ECB on Thursday raised its key interest rates by 50 basis points (bps) and

The first couple of weeks in January are not just among the busiest of the year in the capital markets but can also tell us a lot about the year ahead. In the first GlobalCapital Podcast of the year, we take a look across the credit spectrum from ECB rulings in the leveraged finance market to how sovereigns will fund the energy price crisis.

How bond issuance goes in January is especially important this year after such a disrupted 2022 for so many borrowers. A lot of the problems underlying bond issuers’ attempts to raise capital last year have not been solved — inflation is still high, rates are rising, recession is looming and the effects of war in Ukraine linger.

Nonetheless, issuers across the board enjoyed a strong first few days in the markets. Bigger tests are to come, however, especially once the bloated piles of cash that investors have to deploy each January start to dwindle.

Meanwhile, the ECB has increased the capital it wants banks to hold against their leveraged finance positions. We discuss how that will affect the investment banks that dominate this market, why it could play into the hands of private credit and what it means for leveraged buyout volumes this year.