European Leveraged Finance and Capital Markets: The Pandemic and Its Likely Systemic Impact on International Capital Markets

The international capital markets are presently experiencing one of the most destructive set of circumstances since records began. The cause is a devastating pandemic, which has resulted in widespread public health issues and compelled public authorities to suspend vast areas of social and economic life.

To understand the economic consequences of the pandemic and their impact on financial markets, we must classify them into appropriate categories: first, direct and indirect medical consequences (for example, lost revenues for sick workers who cannot generate economic output while in hospital or at home or the cost of hospitalization); second, economic consequences of containment measures on productivity, consumer spending, corporate earnings and investments; finally, the adverse effect on consumer or business expectations for future economic activity, an adverse recalibration or readjustment of risk across all economic and financial assets and the resulting higher cost of capital.

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