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Peer2Peer Finance News | November 24, 2017

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Alternative lending deals reach new heights across Europe

Alternative lending deals reach new heights across Europe
Kathryn Gaw

THE NUMBER of alternative lending deals in Europe rose by seven per cent in the first quarter of 2017, according to a new report.

Deloitte’s latest Alternative Lender Deal Tracker found that non-bank lenders completed 79 deals in Europe between January and March of this year. More than 60 per cent of those deals were conducted outside of the UK, as the popularity of alternative lending continues to rise across the continent. Over the past five years, 612 deals were done in Europe (outside the UK), compared to 399 in the UK.

Read more: UK alternative lending jumped 48 per cent in final months of 2016

“Non-bank lending is moving beyond the more mature UK market into Europe, boosted by continued growth in European economy,” said Fenton Burgin, head of UK debt advisory at Deloitte. “Despite political uncertainty, global equity markets stand at an all-time high. This in turn is driving investors to be in a ‘risk on’ mode keenly searching for yield. As the loan markets currently have a supply that outstrips demand, investors will find the backing they need.”

The report also revealed that fundraising for all of Europe reached an all-time high of $9.1bn (£7.03bn) in Q1, almost double the $5.4bn which was raised in all of 2016.

Read more: Alternative lenders notch up 201 deals in third quarter

”The first quarter was a bumper one for fundraising, nearly doubling the total funds raised during 2016,” said Floris Hovingh, head of alternative capital solutions at Deloitte. “It shows continued confidence and growth in the direct lending market with established players like Alcentra and Hayfin raising multi-billion dollar funds. The market is favouring larger established managers but as it matures we will see an increasing number of niche strategies emerging within alternative capital providers.”

Hovingh added that the boost in fundraising may be due to recent European Central Bank legislation, which restrict banks to completing deals no more than six times the adjusted leverage, in line with US regulation.

“Whilst this is only relevant for a smaller part of the leveraged loan market it gives a clear signal of the direction of travel,” said Hovingh. “Regulators want to discourage banks from taking on ‘equity like’ risks, creating a gap for alternative capital providers to provide products that fall between debt and equity.”