Record number of debt transactions with alternative lenders in Q3
22 December 2014
Number of deals in European mid-market up 109%, from 35 in Q3 2013 to a record high of 73 in Q3 2014.
European private debt funds have over €50bn of committed capital and are raising another €15bn in the next 12 months
Alternative non-bank lenders recorded 73 deals in the UK and Europe for the third quarter of this year, up 109% on the 35 deals in the same period of 2013. This is the highest volume ever recorded in the Alternative Lender Deal Tracker* from Deloitte, the business advisory firm.
Deloitte estimates that European direct lending funds currently have €50bn of committed capital (which includes spent and unspent capital) for private debt and are looking to raise another €15bn in the next 12 months.
Fenton Burgin, head of UK debt advisory at Deloitte, commented: “There is a growing recognition in lending that one size simply does not fit all. The outlook for alternative lenders is strong for 2015, based on significant capital raised this year. Other factors such as changing investor appetite in a low-yield environment and the improving economic activity in the UK and US economies will only boost this activity. Traditional lenders still face the challenge of capital shortfalls and increased regulatory demands on the allocation of what bank capital there is.
“Alternative lenders are also moving into continental Europe, with dedicated origination teams now in local European countries, and a record of 63% of transactions outside the UK compared to 29% in the third quarter of 2013.”
Floris Hovingh, head of alternative lender coverage at Deloitte, added: “There is a sustained momentum in M&A, which is the largest source of deal flow for alternative lenders according to the deal tracker. Separately, alternative lenders are increasingly unlocking M&A transactions for management/founder owned business looking for a viable alternative to equity when requiring growth capital.
“With the leverage loan and high-yield bond market cooled down, alternative lenders have an opportunity to team up in a club to lend to bigger companies on a direct basis without a bank's involvement.
“Against the norm, Europe is now offering slightly cheaper pricing for borrowers compared to the US leverage loan market. Undoubtedly the European market is more insulated due to lack of M&A in Europe and the significant amount of debt funds raised in the last three years which need to find a home. Furthermore, stateside a significant part of the investor base active in leverage loans are listed funds. They have the ability to instantly withdraw capital when there is a sudden fall in global risk appetite, which has an impact on pricing. This is not the case in Europe as mainly ‘locked in’ capital dedicated to leverage loans invests in this asset class.”
Note to editors
*and related research.
Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from over 35 subscribing, leading alternative lenders. The deal tracker covers a total of 301 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.
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.
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