Since its inception some 5 years ago, Redcliffe’s annual Debt Conference has established itself as one of the leading Debt Conferences in Europe.
The Past 12 months has witnessed some of the most dramatic and far-reaching changes seen in debt markets for many years. Whilst some developments have been incremental in nature the key development has been a major change in the structure of European debt markets as they converge towards a US-style funding model dominated by alternative lenders.
Historically, European debt markets were dominated by traditional bank lenders however, as banks have continued to contract their balance sheets, a range of alternative debt providers have stepped into the breach comprising a mixture of private debt funds bond funds, institutional investors and private wealth managers.
These developments have prompted many, but not all the changes which have emerged in 2014. The key trends can be summarised as follows: First, these lenders have provided a major boost of liquidity which has boosted volumes of loans and bonds with LCD reporting that, as at November 2014, volumes in the leverage market reached new peaks since 2008 driven by record issuance of high yield bonds supplemented by strong issuance in leverage loans. Secondly, the expansion of supply has pushed leverage multiples up to 5x through the end of November compared to 4.7 for the prior period. Third, many of debt funds, which have their roots in the larger, more liquid US market, are more comfortable with reduced lender protection than their European counterparts (specifically cov-lite and cov-loose) since they rely more on liquidly to preserve value in distress. Finally, the shift to alternative lenders has paved the way for the establishment of newer products, especially Unitranche, and the resurrection of second lien.
The investment grade market has also basked in the halo of benign conditions with private placements gaining traction and convertibles managing to hold their place in the sun.
Looking forward, the big development in 2015 could be the emergence of asset based lending. Long established in the US landscape as an attractive replacement for working capital facilities; ABL has failed to gain the same degree of acceptance in Europe. Regulatory pressures on leveraged lending, especially RCFs has seen ABL make steady inroads into the capital structure alongside other forms of longer term funding such as loans or bonds.
As in previous years we have assembled an expert faculty of speakers from a raft of blue chips firms covering the key legal and financing issues, historical and future trends and topical matters in the debt markets.
I look forward to welcoming you on the day to what, I am confident will prove another invaluable toolkit for those active in the market.
Senior Consultant, Grant Thornton UK LLP