European direct lending deal volume drops as BSL market recovers
Direct lending deal volume in Europe fell in the first quarter of 2024, as competition with the broadly syndicated loan (BSL) market heats up.
Debtwire’s research found that €13.7bn (£11.7bn)-worth of direct lending deals were done in the continent in the first three months of the year, across 208 transactions.
This is down from €15.2bn spread across 164 deals in the first quarter of 2023.
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The BSL market has recovered this year, providing cheaper access to leveraged financing.
Institutional loan and high-yield bond issuances totalled €84bn in the first quarter, according to Debtwire, more than double the €31.9bn recorded a year prior.
This has resulted in “a significant threat to direct lenders”, Debtwire said, who have responded by proactively repricing private loans and trimming margins to prevent deals being refinanced in the BSL market.
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Some of Europe’s largest direct lenders – including Goldman Sachs, Blackstone Credit, Apollo Global Management and CVC Credit – have repriced private credit deals in the first quarter.
Tim Hynes, global head of credit research at Debtwire, said the report shows how quickly things can change when the BSL market returns.
“A year-on-year reduction of around 10 per cent in deal volume despite a 16 per cent uptick in deal count is emblematic of an M&A market in which appetite for jumbo-sized leveraged buyouts remains muted,” he added. “The fall can also be attributed in large part to rising competition from the BSL market, which bounced back to life in the first quarter of this year, providing cheaper access to leveraged financing.”
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However, Hynes noted “promising signals in the fundraising market”, as direct lenders collectively raised €15bn in the first quarter. This included Arcmont’s €10bn fundraise for its latest direct lending vintage.
Leading the pack
Park Square topped Debtwire’s first-quarter European direct lender rankings, with seven new deals giving the fund a market share of 6.5 per cent. This was followed by Ares, Goldman Sachs Private Capital, Investec Private Debt, Muzinich and Permira Credit, with six deals each and a market share of 5.6 per cent.
When it comes to ESG-linked deals, Pemberton topped the list, with four transactions and a 12.5 per cent share of the ESG market. In joint-second place were Ares and Apera, both of which recorded three deals, giving them a market share of 9.4 per cent each.
