Direct lending deal quantity in Europe fell within the first quarter of 2024, as competitors with the broadly syndicated mortgage (BSL) market heats up.
Debtwire’s analysis discovered that €13.7bn (£11.7bn)-worth of direct lending offers had been executed within the continent within the first three months of the yr, throughout 208 transactions.
That is down from €15.2bn unfold throughout 164 offers within the first quarter of 2023.
Learn extra: S&P: Rising defaults will check asset high quality of personal credit score funds
The BSL market has recovered this yr, offering cheaper entry to leveraged financing.
Institutional mortgage and high-yield bond issuances totalled €84bn within the first quarter, in accordance with Debtwire, greater than double the €31.9bn recorded a yr prior.
This has resulted in “a big menace to direct lenders”, Debtwire mentioned, who’ve responded by proactively repricing non-public loans and trimming margins to forestall offers being refinanced within the BSL market.
Learn extra: Rising ‘bifurcation’ of high quality in center market non-public credit score
A few of Europe’s largest direct lenders – together with Goldman Sachs, Blackstone Credit score, Apollo International Administration and CVC Credit score – have repriced non-public credit score offers within the first quarter.
Tim Hynes, world head of credit score analysis at Debtwire, mentioned the report exhibits how rapidly issues can change when the BSL market returns.
“A year-on-year discount of round 10 per cent in deal quantity regardless of a 16 per cent uptick in deal rely is emblematic of an M&A market during which urge for food for jumbo-sized leveraged buyouts stays muted,” he added. “The autumn will also be attributed largely to rising competitors from the BSL market, which bounced again to life within the first quarter of this yr, offering cheaper entry to leveraged financing.”
Learn extra: Moody’s downgrades three direct lending funds
Nevertheless, Hynes famous “promising alerts within the fundraising market”, as direct lenders collectively raised €15bn within the first quarter. This included Arcmont’s €10bn fundraise for its newest direct lending classic.
Main the pack
Park Sq. topped Debtwire’s first-quarter European direct lender rankings, with seven new offers giving the fund a market share of 6.5 per cent. This was adopted by Ares, Goldman Sachs Non-public Capital, Investec Non-public Debt, Muzinich and Permira Credit score, with six offers every and a market share of 5.6 per cent.
In the case of ESG-linked offers, Pemberton topped the checklist, with 4 transactions and a 12.5 per cent share of the ESG market. In joint-second place had been Ares and Apera, each of which recorded three offers, giving them a market share of 9.4 per cent every.
