Middle Market: Private Debt Funds Account for Half of European Leveraged Loans

In the U.K., private debt funds racked up a market share of almost 50% of mid-market term loans (those under €300 million in size) in the first half of 2018, according to advisory firm AlixPartners’ bi-annual mid-market debt report. When stretch senior deals were combined with unitranche loans, private debt funds provided 46% of loans in the U.K., the report reveals.

Sources credited the continued increase in debt funds’ market share to the maturity of the U.K. market, as well as the density and openness of sponsors operating there to non-bank lenders.

The total deal count for European debt funds in the first six months of 2018 hit 181, led by Ares (21 deals) and Tikehau (16 deals). That figure was down on the 203 deals racked up in the second half of 2017. On an overall European basis, unitranche deals increased their market share to 31% of all deals recorded, up from 27% in 2017, said the report. That proportion rises to 35% when super-senior and junior facilities are excluded.

Unlike the large-cap syndicated market, which has been dominated by M&A this year, the drivers for mid-market deals have remained extremely stable, according to AlixPartners. The proportion of leveraged buyouts (45%) and refinancings (24%) were the same in 1H18 as they were for full-year 2017. Add-on acquisitions increased marginally from 22% in 2017 to 25%, while dividend recaps fell to 6% in the first half of the year, from 8% in 2017. — Rachel McGovern

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