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Credit Funds
At The Forefront of the Industry
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Private Debt Investor
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
Direct lending issuance totalled €15.8 billion in 2020, a 13% decline from the previous year’s €18.2 billion. Under the circumstances, however, the final tally augurs well for the direct lending market. Deals came in ebbs and flows throughout the year during the intermittent periods of favourable financial conditions, which resulted in volumes from the three months of March, June and September accounting for almost half of the issuance for the year overall. In Q4, €4.13 billion was raised across 124 deals, marking something of a return to a more even level of activity. A total of 424 deals were completed over 2020 and, due to the dip in the average size of the facilities, this compares even more favourably to 2019 than the overall debt total. Unitranches accounted for just under 60% of direct lending issuance over the course of the year, in line with historical averages.
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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