Alternative Lender Deal Tracker

Article

Alternative Lender Deal Tracker

Direct Lenders: seizing opportunity in an uncertain world

This issue covers data for the second quarter of 2018 and includes 102 Alternative Lender deals for the quarter, representing an increase of 34% in deal flow on a last 12 months basis in comparison with the previous year.

In this twentieth edition of the Deloitte Alternative Lender Deal Tracker, we report that in the 12 months to the end of the second quarter 2018, there was a solid 34% increase in Alternative Lending deals compared to the previous year. Lending in the quarter alone is up 31% to 102 deals compared to the same period in 2017. Our report covers 66 major Alternative Lenders with whom Deloitte is tracking deals across Europe.
 

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Key findings

  • A 34% increase in Alternative Lending deals compared to the previous year proves that uncertain political, geopolitical and macro-environment events did not deter Direct Lenders - lending in Q2 alone reached 102 deals, a 31% increase compared to the same period in 2017
  • Continued Brexit uncertainty raises questions regarding UK interest rates, the price of Stirling and the role of the Bank of England in a worst case scenario of no deal next March. However, we predict continued growth in deal volumes for the remainder of 2018 given that Direct Lenders continue to increase their market share and deploy record levels of capital
  • The US increased short term interest rates for a third time this year. Recently, the yield on the benchmark 10 year US treasury reached 3.2%, its highest level since 2011, and up a notable 83 basis points so far in 2018. Whilst this increases pressure on others to follow suit, the immediate reaction affected the value of Emerging Market (EM) assets, entering EM into a bear market
  • Q3 of 2018 marked the worst quarter in eight years for European fundraising, said to be fuelled by a sharp decline in investors’ appetite for U.K. PE dedicated funds in light of Brexit
  • PE investors are waiting for better times, as it would be hard for 2018 vintage funds to outperform in the context of historic high EV multiples of 11.1x YTD August 2018 according to LCD. It is therefore not unsurprising that structured strategy is popular with end investors toward the back end of the cycle, as it provides downside protection for investors
  • When the cycle turns we expect the opportunity set to increase for alternative lenders, as banks are typically the first to hit the brakes when the economy is under pressure

Authors
Deloitte Alternative Lender Deal Tracker editorial team

- Floris Hovingh, Partner
- Andrew Cruickshank, Assistant Director
- Magda Tylus, Manager
- Shazad Khan, Manager

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