(Bloomberg) -- For banks sitting on a pile of high-risk debt they've been unable to sell, the full return of Europe's junk debt market cannot come too soon.

Amid the upbeat mood that prevailed before the coronavirus struck Europe, banks agreed to provide nearly $13 billion of bonds and loans to support acquisitions. They planned to sell this debt to eager investors--only to see the markets slam shut.

With every week that passes, more of those deals are finalized, leaving the banks to stump up the funding themselves. So far, arranging banks have funded nearly $6 billion and could be called upon for much of the remaining $7 billion in the coming months.

Deals that have closed	Debt provided by banks	Arrangers
Stonegate's acquisition of Ei Group	GBP1.9b	Barclays, GS, Nomura, DB, Lloyds, Rabo
Boels' acquisition of Cramo	EU1.61b	CS, ING, ABN, Rabo, BNPP
Ardian's acquisition of Audiotonix	~$400m-equivalent	BoI, CACIB, HSBC
Ardian's acquisition of Cerelia	EU382.5m	SG, BNPP, ING, Natixis, BoI, RBC
PureGym's acquisition of Fitness World	EU445m	Barclays, Jefferies, RBC, Credit Suisse, ING, Danske
Iliad's share buyback	EU300m	BNPP, CACIB, Natixis, SG

This week, the first new high-yield bond since February -- a small 200 million euro issue -- appeared in a tentative step toward reopening. But raising new debt will still be punitively expensive compared with when these overhanging deals were struck.

Two months ago, junk bond trading levels implied a yield of 3.2%, based on the Bloomberg Barclays Pan-European Index. Now, it's just under 8%. Leveraged loans, despite rebounding, are trading around 88 cents on the euro, from around 98.5 cents in February.

“The hot leveraged loan market until earlier this year was driven by the supply demand imbalance with few new money deals relative to the amounts of money chasing them,” Joerg Bachtler, head of leveraged syndicate and sales at Investec Bank, said. “At the moment the levels of fundraising vs pre-Covid have decreased tremendously.”

The largest deals yet to syndicate in Europe are a 1.9 billion pound financing for Stonegate Pub Co.'s takeover of the U.K.'s biggest pub chain--already closed and funded--and a private equity buyout of Thyssenkrupp AG's elevator unit. That's due to close by the end of June, and entails term loans and bonds worth 8.25 billion euros, to be split between the European and U.S. markets.

Pending M&A deals

Exp. deal closing

Committed debt financing

Arrangers

Permira's acquisition of Golden Goose

coming weeks

EU450m

Mediobanca, others

Painful Cuts

To make matters even more challenging, falling earnings and tightening liquidity among sub-investment grade companies are driving slews of ratings downgrades.

Stonegate and Pure Gym Group Plc, both with deals waiting to come to market, have been cut to seven and six steps respectively below investment grade, and lower ratings will make debt-raising even more expensive than expected.

In Stonegate's case, S&P Global Ratings wrote last month that if economic weakness continues through 2020 or beyond the company could be at risk of defaulting.

A Stonegate spokeswoman declined to comment. A PureGym spokesman referred to a previous statement that said the company doesn't have “any concerns” about the bridge loan.

For high-yield borrowers, the ability to fund “remains challenging,” Andrey Kuznetsov, a portfolio manager at Federated Hermes International, said in a telephone interview.

“There's very little guidance and little understanding of what the actual impact on fundamentals will be, apart from the fact that they are getting worse and default rates will pick up.”

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