Ralph Betz, Managing Director at EQT Partners; Benjamin Blumenschein, Senior Director at Crescent Capital; Paul H. F. Kim, Managing Partner at Herter & Co.; Michael-Franz Müller, Head of Leveraged Finance Germany at NIBC Bank; Oliver Wolter, Head of Leveraged Finance DACH and Managing Director at SMBC Frankfurt Branch and panel head Dr. Oliver K. Hahnelt, Partner at McDermott Will & Emery discussed transaction financing.
The panel gave insight into the latest trends on the corporate finance market in Germany, particularly in the continuing rise of market shares of private debt funds in the MidCap leverage finance sector. In terms of leveraged finance, panel head Dr. Hahnelt stated that it has been quite an active year so far, though not as active as 2018, when the market share of private debt funds reaching a new all-time high of approximately 56%.
According to the experts, there are several factors that have contributed to the continued shift to leveraged finance transactions and their increased funding by private debt than bank debt. Among other reasons and factors, there is pressure on the banks in terms of compliance, the flexibility of private debt
funds vary in terms of structuring, the financing and the speed of its decision-making process and more often aspects of confidentiality. Despite the general rise of debt funds, Michael-Franz Müller stated there are still sectors where the engagement of private debt funds is limited with banks maintaining their market share.
The panelists agreed that there is still a number of obstacles for private debt funds to deploy monies in the non-sponsor corporate lending territory, of course subject to certain areas where private debt already is considered as a valid alternative to bank debt.
Asked for a look one year into the future as to whether we will see increased default rates, the experts’ opinions slightly diverged. But, the panelists agreed that any upcoming crisis presumably will not result in a major re-shuffle of market shares in favor of banks. Rather, if the default rates increase, this may have an effect of consolidation in the private debt fund segment themselves with the larger and more established private debt funds to take over market shares.
Dr. Oliver Hahnelt,
McDermott Will & Emery