Innovation in debt markets funds growth

Date

Related Content

As featured in Insider – June 2017

Director Joe Dyke looks at debt providers offering more innovative choices to borrowers.

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.

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 continue 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 transactions include advising:.

  • the management team of Arlington Industries, on the debt raise for the acquisition of automotive mechanical engineering firm Magal Engineering Group and a refinance of current debt; and
  • 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.

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.

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. Borrowers need 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.