Innovation in debt markets funds European growth

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Debt markets across Europe continue to see a broadening of debt providers with the structures available becoming more innovative.  This provides an increased range of options to borrowers who are looking to fund business growth or undertake change of ownership transactions.

In a review of 2016 activity, mid-market debt specialists Clearwater International noted the above trend showed no signs of easing with the traditional banks establishing strategic links with specialist debt funds to fulfil borrower funding requirements.

With a wider range of routes to fund-raising, multiples attached to M&A activity continued to remain generous with buyers/investors using debt as an instrument to underpin business valuations.  This is particularly evident in the UK and we expect this trend to spread across Western European territories specifically.  Loan volumes across Europe continued to grow throughout 2016, even in the face of the June Brexit vote, with Clearwater International advising more businesses than ever on their debt raises. Notable amongst these 23 transactions were:

Away Resorts – Clearwater International has advised LDC-backed UK holiday park operator Away Resorts, raising a significant debt facility to support its acquisition of Sandy Balls Holiday Village in the New Forest, forming a group with 6 sites valued in excess of €100m.

FM Conway – Clearwater International advised leading infrastructure services company FM Conway, on its multi-million pound refinance and debt raise, to support the acquisition of United Asphalt. United Asphalt operates two asphalt plants, Theale in Berkshire and Croydon, together with a recycling depot at Coltrop, Berkshire. The Theale plant is rail fed and helps satisfy the company’s strategic objections of growth West of London and access to the rail network.

Beech Properties – Clearwater International advised this owner-managed UK regional developer on its €38m finance raise from London based fund RoundShield Partners. The deal highlighted the continued shift we have seen in the debt market away from traditional banks towards alternative lenders, who are able to offer more flexible debt capital.

A key trend that Clearwater has followed closely has been the increase of the specialist debt providers/alternative lenders looking to compete with financial sponsors directly when business owners are looking to pass their business to second generation family members/incumbent management teams or even de-risk personally. However, although this can appear to be an attractive option, it is not suitable for all parties, highlighting again how the complexities of debt structures for individual scenarios can often require a business to consult an advisor.

With H2 2015 seeing record levels of capital being raised by debt funds, the consequence of this will be increased pressure for it to be deployed, it would seem that 2017 will be another sterling year for businesses to fund their innovation and growth.

Mark Taylor, Head of Debt Advisory, Clearwater International said: ‘The days of calling your relationship banker and using them as a barometer for debt are now behind us, increasing the need for specialist guidance. My advice for borrowers in 2017 is to prepare and plan in advance for a debt raise, with the support of an advisor to help assess the most appropriate structure – you may be surprised when you see the options available and how bespoke these can be.”