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Number of debt transactions with alternative lenders up 43% last year

14 March 2015

Non-bank lenders recorded 195 deals in the UK and mainland Europe in 2014, up 43% on the 136 deals for 2013, according to the Alternative Lender Deal Tracker from Deloitte.

Fenton Burgin, head of UK debt advisory at Deloitte, commented: “With strong year on year growth, 2015 could offer a bumper time for alternative lenders, now firmly established alongside mainstream banks. With increased confidence in the markets and wider funding options, we are seeing a pick-up in M&A activity.”

For just over half (51%) of transactions M&A was given as the reason for the deal, overtaking refinancing, when considering deals since the tracker began at end of 2012.

Fenton Burgin added: “2015 is a great time to be a borrower, as the sheer size and diversity of the liquidity targeting the mid-market has resulted in downward pressure on pricing and the emergence of innovative new structures.

“In response we’ve seen some banks teaming up with alternative lenders to provide more flexible structures.  The bank is the first to get paid out, while alternative lenders take a higher yielding, but higher risk ‘first loss’ position. Whilst most alternative lender funds will charge higher interest rates than the banks, the flexibility borrowers receive enhances equity value in the long-term for shareholders.”

The deal tracker also found that 62% of deals (121 deals) were conducted in mainland Europe in 2014, compared to 38% of deals completed in the UK (74 deals).

Floris Hovingh, head of alternative lender coverage at Deloitte, added: “There is increasing activity in France, Germany and Southern Europe. However, mainland Europe may not embrace direct lenders with the same lightning speed as the UK due to the larger share of family or founder owned businesses, who are intrinsically more risk averse than private equity.”

Floris Hovingh concluded:  “There remain ample opportunities for growth in the UK. Smaller mid-market private equity houses still using high street banks are likely to consider direct lending as the market moves down in deal size.”

End

Note to editors
Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from over 36 subscribing, leading alternative lenders. The deal tracker covers a total of 354 transactions since the fourth quarter of 2012. Deloitte tracks primary mid-market deals across Europe with up to €350m of debt. On a quarterly basis, full data is provided to all subscribers and a summary report provided to market participants highlighting key market trends and developments.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte debt advisory provides independent advice to borrowers across the full spectrum of debt markets through our global network of 140 debt professionals in 30 countries. Deloitte debt advisory is the market leader for UK mid-market alternative lender transactions, having advised on over 20 alternative lender transactions in UK since 2012.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited

Will Black
Deloitte LLP
+44 (0) 20 7007 8242
+44 (0) 78 2511 3222
wiblack@deloitte.co.uk

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