Alternative Lender Deal Tracker
Direct Lenders on a path to disruption with gorilla deals
This issue covers data for the fourth quarter of 2018 and includes 98 Alternative Lender deals for the quarter, representing an increase of 9% in deal flow on a last 12 months basis in comparison with the previous year.
In this twenty-first edition of the Deloitte Alternative Lender Deal Tracker, we report that in the 12 months to the end of the fourth quarter 2018, there was a solid 9% increase in Alternative Lending deals compared to the previous year. Our report covers 67 major Alternative Lenders with whom Deloitte is tracking deals across Europe.
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- A 9% increase in Alternative Lending deals compared to the previous year shows that while Direct Lenders are targeting more deals, the rate of growth is slowing. This could indicate that Direct Lenders, and to an extent the sponsors they work with, are becoming increasingly cautious.
- Fund raising continues apace with Ares raising a €6.5bn European Direct Lending fund. BlueBay are currently raising a €6bn fund, and there are rumours ICG is hot on their heels. In addition, Ares completed a £1bn refinancing for Daisy Group, the software services business, in the largest ever European direct lending deal. This strongly suggests that Direct Lenders are chasing gorilla deals to monopolise funds.
- At the current growth rate, the private debt asset class is forecast to hit $1.4bn globally by 2023. This implies the asset class would surpass real estate to become the third-largest alternative asset after hedge funds and private equity. With size comes infrastructure, and it can’t be long before we see funds adopting a bank style model, hiring syndications teams, underwriting even bigger deals and syndicating part of the debt.
- The current global economic and political environment remains at a crossroads on waiting to see the impact of the US Fed’s U-turn on raising rates, ongoing trade tensions between major trading blocks and the ongoing Brexit uncertainty.
- Annualised default rates for leveraged loans are historically low (below 1%) when compared with the 2007-2012 average of 3.5%. However, some critics say that low default rates are down to the increasingly loose covenants in the market which allow borrowers to limp on, meeting interest payments yet without breaching a covenant until it’s too late.
Deloitte Alternative Lender Deal Tracker editorial team
- Floris Hovingh, Partner
- Andrew Cruickshank, Assistant Director
- Shazad Khan, Manager
- Tim Mercorio, Assistant Manager