New means of Financing
Status quo of direct lending, summer 2018
The financing landscape is changing fundamentally.
Our Debt Advisory team UK has been in active dialogue with the leading European Alternative Lenders to set up a quarterly database, which monitors the primary European deal activity involving these lenders. 60 alternative debt funds currently participate in the Deloitte Alternative Lender Deal Tracker and the results are released to interested parties on a quarterly basis in a public version of the tracker. Find here the German contact of this paper.
Direct lending means providing debt to corporates by lenders that are non-banks and without using banks as intermediaries. While Europe has traditionally always been a bank-dominated economy (quite different to, for example, the US), that began to change after the 2007/2008 financial crisis – for three reasons:
- Side effects of tightening bank regulation in the wake of the financial crisis: bank lent out money more selectively;
- intended effects of a movement in Europe to foster financing the real economy outside the classic bank sector (see Capital Markets Union); loan originating funds in various European countries had only been admitted by the regulators in 2015;
- low-interest environment; investors were and still are searching for yield.
Direct lenders collect money from hedge funds, private-equity funds, insurance firms et al. who wish to invest. They are pooling this money in a fund and deploying it towards, mostly, small and medium size enterprises.