European economic outlook

  • 2021 saw a 190% increase in debt deals vs 2020, with over 847 debt deals closed (506 of those in Q3 and Q4) (1)
  • This activity was driven by a rebound in M&A and refinancing – causing an uptick in activity levels
  • This was supported by significant liquidity, particularly from direct lenders increasing their market share from 30% in 2020 to 39% in 2021 (2)
  • Looking ahead, the geopolitical turbulence is impacting market activity with both high yield and liquid loan markets resetting to the new macro dynamics
  • As well as assessing the impact of the wide-ranging and evolving geopolitical volatility, corporates are already navigating a number of other headwinds, including:
    • persistent inflation - particularly across energy and commodities;
    • supply chain disruption;
    • labour market squeeze; and
    • rising interest rates
  • These headwinds may trigger higher levels of stressed activity, particularly in sectors that are seeking to adapt to a post-pandemic world, some with overleveraged capital structures
  • Conditions for supply in the market are expected to remain broadly supportive, although lenders will be paying close attention to the direct and indirect impact from the macro-political backdrop
  • Terms are expected to remain bifurcated based on credit quality, with lenders reserving more attractive terms for those that have demonstrated resilience
  • ESG is also expected to remain a key focus area for lenders in the coming year, both in terms of screening deals and throughout a deal lifecycle

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[1] January 2022 DC Advisory Lender Survey - DC Advisory’s independent survey of 93 European banks and direct lenders, which was completed in January 2022 (conducted across UK, France, Germany, Austria, Switzerland, Spain, Belgium, Netherlands and Luxembourg) (referred to herein as the “The January 2022 DC Advisory Lender Survey”); All data in the tables in this piece have been collected via the January 2022 DC Advisory Lender Survey.

[2] The January 2022 DC Advisory Lender Survey”