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Q4 2020
Data analysis
Debtwire direct lending data
Research by
Ben Watson
Market analyst
Debtwire Par
Direct lending issuance jumps up in Q4 following a lacklustre pandemic performance
Mid-market volume vs number of deals
Direct lending portion of mid-market declines
While direct lending continued steadfastly, the traditional portion of the mid-market maintained its lead in issuance over direct lending that was gained in early 2019. The €5.03 billion of direct lending issuance raised in 2020 was handily surpassed by the €13.2 billion elsewhere in the mid-market space. Mid-market direct lending now represents just under 30% of total mid-market volume, compared to 45% in 2017, 48% in 2018 and 42% in 2019.
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Use of proceeds
Dealmaking creates bedrock of issuance
M&A activity buttressed direct lending issuance over the course of 2020, averaging €2.4 billion per quarter. Refinancing was more variable. That said, the figure is heavily skewed by the largest deal of the year – UK insurance broker Ardonagh’s €2.27 billion direct lending facility.
Number of unitranches vs unitranche volume
2020 marked by opportunistic issuance
Large cap vs mid-market unitrache
Consistent unitranche activity
The troubled waters of 2020 were well navigated by direct lenders, with unitranche issuance totalling €10.8 billion for the year. Even while broadly syndicated loans were absent in April and generally struggled for the remainder of Q2, large cap (above €150 million debt) unitranche volume surged to more than €3 billion. Over the year, mid-market unitranches maintained a solid and stable performance, reaching a sum of €3.5 billion and ending on a high – 34 deals worth €500 million were completed in December.
Sub-regional unitranche distribution
UK issuance’s dominance still unrivalled
The distribution of direct lending deals per region was relatively stable, with noticeable trends of increasing DACH issuance (82 deals completed), while French direct lending marginally declined to 18% of issuance with 91 deals. The UK continued its dominance in the market with €6.56 billion in issuance over 187 deals in 2020.
Sectoral issuance
Financial sector fills in gap left by TMT
Looking past the small contraction to overall issuance in 2020, the TMT sector saw the most significant change in proportional issuance, dropping to under €2 billion – less than half the €4.5 billion raised in 2019. The financial services sector expanded over 2020 to represent 26% of issuance. Excluding the landmark direct lending deal from Ardonagh, the healthcare sector rose to lead activity by sector with €2.26 billion, comprising 17% of issuance.
European Direct Lending Perspectives
Q4 2020
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