Direct Lending Report 2022: Going mainstream

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Direct lenders have proved the doubters wrong. This is especially true across the European leveraged finance market that was, until recently, controlled by traditional banks. The inroads made by private debt funds in a few short years have been impressive.

Even more striking is how these funds have taken the pandemic period in their stride. Following the market freeze in the first half of 2020, debt funds dived back into the market at a frenetic pace. Fundraising and dealmaking both set new records in 2021 and the space has never looked in better shape.

Last year's boom in activity was spurred by historic levels of private equity (PE) deal flow and the unique ability of direct lenders to meet the needs of financial sponsors. Debt funds have been willing to give companies the necessary breathing room to operate during this period of uncertainty and instability. And there is little sign of sponsors slowing down either, which stands direct lenders in good stead for 2022.

In this report, we look back over a year of abundance and outline what can be expected as we head in to the third year of a pandemic that is increasingly proving to be an endemic challenge. We will also go in-depth on the current state of the direct lending market, how the monetary-tightening environment might benefit private debt investment strategies and the increasing role that ESG is playing in these loans. Direct lending has gone mainstream. There's no going back now.

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In this issue

  • Taking the stage: Direct lending market in Europe
    7 April 2022

    It's safe to say Europe's direct lending has stepped out from the shadow of its older, more established US cousin. And the stage is set for the market to grow bigger and faster. Europe's direct lending market took some time to get going, but last year the region firmly planted its flag in the ground.

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  • Old dog, new tricks: Direct lending in the US
    7 April 2022

    The US direct lending market may be more mainstream than its European cousin but was far from dull, enjoying its biggest year ever in 2021. Fundraisers in the US direct lending market pulled off a remarkable feat in 2020. As panic set in around the world and businesses battened down the hatches, private debt managers celebrated a stand-out year.

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  • Direct lending and ESG
    7 April 2022

    Managers of private capital are becoming more aware of environmental, social and governance (ESG) concerns and direct lenders are no exception. Richard Normington, legal director, discusses how this emergent trend is developing and what to expect in the future.

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  • Pushing the envelope: Fundraising in 2022
    7 April 2022

    Fundraising last year hit record levels as mega funds poured into the asset class. And 2022 could see more of the same. There's no stopping private credit fundraising in Europe. At the start of last year, Debtwire surveyed the market to gauge expectations of what was to come in 2021. As much as 94% of respondents foresaw European-focused direct lending funds raising more than EUR20 billion in the year. And these optimists were proven right.

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  • Regions under the spotlight: DACH and Benelux
    7 April 2022

    'Taking a step back, if the US is T, then the UK is T minus one. Then you have the Netherlands and Germany at T minus two or three, and Belgium after that, in terms of chronological development," says Max Mayer, a partner in DLA Piper's Amsterdam debt finance practice.

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  • The journey continues: The future of direct lending
    7 April 2022

    Europe's direct lending market has come an awful long way over the past decade, and yet has so much more room to grow. Direct lending is becoming mainstream but forecasts show it could become commonplace. Oxford University's Said Business School has estimated that assets under management (AUM) may rise by up to 50% in the medium term if market penetration grows in line with current levels seen in the US, measured by AUM as a percentage of GDP.

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