Europe’s Alternative Lending Market Growing
Europe’s alternative lending markets are becoming increasingly accessible to mid-market companies, according to a report by Standard & Poor’s (S&P) Rating Services.
The report analyses how increasing issuance of private funding for mid-market companies in Europe has ushered in new and more international borrowers. In addition, the report looks at several initiatives from various industry bodies that are building out a pan-European private placement market. It has been predicted that this shift in trend will support additional economic growth in Europe.
Among the report’s findings:
Overall in volume terms, private placement markets for European issuers – including the US private placement (USPP) market and Germany’s Schuldschein loans – have remained solid over the past few years, totalling roughly €28bn in 2014. The USPP market remains the largest one for European issuers with about €13bn raised in 2014, although it declined from just over €14bn in 2013 and €16bn in 2012.
The Schuldschein loan market, mature and stable in size between €9bn and €12bn in the past three years, continued to open up for non-German issuers in 2014, as highlighted by the €359mn that French healthcare service provider Korian issued in Q4 of 2014.
This happened at the same as time as the European PP market (including French euro PP) continued to gain traction, with €4bn of issuance in 2014, in line with 2013, compared to €3.2bn in 2012, according to S&P’s estimates.
Meanwhile, in the growing direct lending market, S&P estimates that credit funds have raised a substantial €45bn of capital up to the end of 2014, which it expects to be deployed mostly in sponsor-led transactions.
Although this market is most active in London, the companies tapping into this capital are from a wide variety of countries in Europe. S&P says that its conversations with market participants indicates that corporates raised more than €10bn in capital in 2014 across more than 200 deals, at least double the volume and value at the end of 2013, when the total raised was likely to have been closer to €5bn.