Diverging economic conditions on either side of the Atlantic—as well as geopolitical issues such as global stock market volatility and plummeting oil prices—mean issuers, lenders and their advisers are entering unknown territory.
As global debt markets push into 2016, two certainties remain: companies require financing, and investors still continue to hunt for yield. As a result, the European high yield and leveraged loan markets have been steadily growing in size and sophistication since the financial crisis, and are now established and accessible tools for borrowers and lenders alike.
And after a slump in 2015, leveraged debt looks set to advance at a sustainable pace rather than the notable surge witnessed in 2014.
Innovation is likely to continue into 2016, with issuers working with their advisers to structure new ways of raising capital that work for them, including continuing to import technology from the US markets. Bespoke deals are on the rise, and increasing levels of capital are being put to work by investors who prefer to stand by companies and work out strategies to get them through tough times rather than to head for default, insolvency or a complex and lengthy restructuring process.
Additionally, secondary markets are developing in Europe, enhancing liquidity and strengthening the region's position on the world's stage.
However, issuers are not going to have it all their own way. Lenders have begun to push back on terms that have become ever-more loose in recent years as volumes and values have risen. This will continue to be relevant in 2016. Given these considerations, perhaps a sophisticated and keen understanding of the differences between debt products and legal jurisdictional rules and their implications will define 2016.
There is some way to go until Europe's debt markets challenge the US, but if issuers and borrowers can work together, they will have already started out strongly on the right path.