Alternative lender deals up 22% on last year

The Alternative Lender Deal Tracker report by Deloitte, published today, confirms a 22% growth increase on the previous year in the direct lending market.

The report, taking data from 64 non-bank lenders, reveals 76 lending deals in the first quarter of 2018. This represents a decline by 7% compared to the same period in 2017.

Floris Hovingh, partner and head of Alternative Capital Solutions at Deloitte, comments: “Although deal volume slightly declined in the first quarter of 2018, the penetration of direct lending continues, increasing 22% year on year. With an abundance of cash available for investment into the private debt market and continued search for yield, we expect this trend to continue into 2019.”

The majority of the deals are M&A related, with 67% of the UK and Euro deals being used to fund a buyout. Of the 358 deals in the last 12 months, 60 deals did not involve a private equity sponsor. A fifth of the surveyed direct lender managers completed 10 or more deals in the last 12 months.

The report suggests that more cautious sentiment is beginning to filter through into the syndicated loan markets. Hovingh continues: “Whilst Q1 may not be the indicator of things to come for the rest of 2018, primary market participants have begun to push back on documentation, and new issue pricing has risen. There are no clear signs that the more cautious approach in the syndicated market has trickled down to the direct lending markets. This could be due to the pressure fund managers are facing to deploy record levels of dry powder, with managers having access to €57bn in commitments targeting the region as at March 2018, up nearly €3bn from the end of 2017.”

Hovingh concludes: “From a macroeconomic perspective, there is a growing divergence between the US, Europe and the UK, with the former showing GDP growth of 2.3% in Q1 2018, versus that of 0.4% and 0.2% respectively. In June the US Federal Reserve raised interest rates for the seventh time, to 2%. With nine years of unprecedented low interest rates in the UK, the gap of 1.5% is wider today than at any point within the last 35 years.”

End

Notes to editors

Deloitte’s nineteenth edition of the ‘Alternative Lender Deal Tracker’ compiles data and information on a confidential basis from 60 subscribing leading alternative lenders. These are direct lending deals across Europe. The tracker covers a total of 1381 transactions dating from the fourth quarter of 2012. 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.

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