Debt transactions with alternative lenders increase across Europe
4 July 2017
- Non-bank lending deals up 7% in Europe, with 79 deals in the first quarter of 2017
- Q1 2017 the strongest quarter ever for European direct lending fundraising, reaching US $9.1bn
Non-bank lenders completed 79 deals in Europe in the first quarter of this year, up 7% compared to the previous year, according to Deloitte’s Alternative Lender Deal Tracker. These deals are increasingly done outside the UK, with over 60% of the 79 deals being completed in the rest of Europe. Looking back over the past five years, 612 deals were done in Europe (outside the UK), compared to 399 in the UK.
Meanwhile, fundraising for all of Europe reached US $9.1bn in the first quarter of 2017, already nearly twice the US $5.4bn raised in all of 2016.
Fenton Burgin, Head of UK Debt Advisory at Deloitte, comments: “Non-bank lending is moving beyond the more mature UK market into Europe, boosted by continued growth in European economy. Despite political uncertainty, global equity markets stand at an all-time high. This in turn is driving investors to be in a 'risk on' mode keenly searching for yield. As the loan markets currently have a supply that outstrips demand, investors will find the backing they need.”
Floris Hovingh, Head of Alternative Capital Solutions at Deloitte, adds: ”The first quarter was a bumper one for fundraising, nearly doubling the total funds raised during 2016. It shows continued confidence and growth in the direct lending market with established players like Alcentra (€2.2bn) and Hayfin (over €3.5bn) raising multi-billion dollar funds. The market is favouring larger established managers but as it matures we will see an increasing number of niche strategies emerging within alternative capital providers.
“The ECB issued its final guidelines on leveraged lending in Europe, restricting banks to completing deals at over 6x adjusted leverage in line with US regulation. Whilst this is only relevant for a smaller part of the leveraged loan market it gives a clear signal of the direction of travel. Regulators want to discourage banks from taking on 'equity like' risks, creating a gap for alternative capital providers to provide products that fall between debt and equity.”
Notes to editors
Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from 59 subscribing leading alternative lenders. The tracker covers a total of 1011 transactions dating from the fourth quarter of 2012. These are primary mid-market direct lending deals across Europe. 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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