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Number of debt transactions with alternative lenders up 9% for 2015 as recent volatility creates opportunities in the debt markets

17 March 2016

Non-bank lenders recorded a total of 242 deals for the whole of 2015, up 9% on the 222 deals during 2014, according to the Alternative Lender Deal Tracker from Deloitte. In the final quarter of 2015, there were 63 deals in the UK and mainland Europe, up 3% on the 61 deals for the same period last year.

Fenton Burgin, Head of UK Debt Advisory at Deloitte, commented: “There are signs we've reached a tipping point in the European debt markets, with greater scrutiny on increasing numbers of transactions due to current volatility. We see European credit markets remaining volatile with risk premiums staying higher than in 2015. This degree of caution from banks and institutional lenders is creating opportunities for alternative lenders further down the chain. Meanwhile the mid-market remains very borrower friendly as a result of c. €38bn of dry powder awaiting deployment by direct lenders.”

Floris Hovingh, Head of Alternative Lender Coverage at Deloitte, added: “Current market volatility creates an unprecedented opportunity for newly set up direct lending funds with locked in capital. Borrowers are looking for certainty of pricing, which is proving difficult to find in the current market environment.”

The upper mid-market (€200-400m), previously preserved for syndicated and High Yield Bond transactions, is now wide open for direct lenders whose hold size have increased to as much as €300m for a number of funds.

From a broader perspective, the European High Yield markets have been virtually closed in the first quarter of this year, with only a small number of deals going out to market. In particular, investors have significantly increased their risk premiums for lower rated bonds. The yield on B-rated bonds increased from 6% in October 2015 to almost 8% at the start of 2016.

Floris Hovingh concluded: “With the high-yield bond markets virtually shut to sponsors, we anticipate they will revert to loan based financing strategies over the next six months, the ground where these non-bank lenders operate.”

End

Notes to editors
Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from over 42 subscribing leading alternative lenders. The tracker covers a total of 629 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.

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.

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 20 7007 8242
+44 7788 714690
wiblack@deloitte.co.uk

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