CFA Webinar
Direct Lenders play an increasingly important role in financing SMEs, especially in relation to M+A transactions they are increasingly replacing banks. In Europe the direct lending market has grown to well over €300bn and is now rivaling the broadly syndicated loan market and high yield bond market in size.
Leveraged finance transactions are by their very nature more susceptible to stress. Stress factors can be market related, like the strong rise in interest rates in 2022, or idiosyncratic. In any case given the strong growth of the direct lending market it should be no surprise that the number of debt to equity swaps is also increasing. The need to restructure a capital structure from time to time should therefore be viewed as a natural part of the direct lending business and having a clear process how to manage such situations be part of a direct lender's investment process.
