Our thinking

European leveraged finance: A whole new world

What's inside

European leveraged finance in 2023 was saddled with the negative effects of elevated interest rates. But as the market adjusts to the "new normal", rate and price stability offer hope for a brighter 2024.

European leveraged finance overview

  • Rising interest rates have pushed up borrowing costs and constrained issuance activity
  • Subdued M&A pipeline and cautious underwriting by banks limit buyout financing opportunities
  • Where transactions have progressed, the bulk of activity has been propelled by refinancing deals
  • Private credit proves resilient in the face of wider dislocation, attracting banks into the segment
  • Jumbo Worldpay financing shows that investor appetite for high-quality credits remains strong, with a potential warming for backdrop in 2024
aerial photo of London

Five factors shaping leveraged finance in 2024

  • After a slow year, market behaviour will mimic certain human traits, which will act as drivers in leveraged finance markets in 2024, as lenders and borrowers look to increase activity levels
  • Restlessness, imitation, creativity, distraction and optimism will, in their own way, each propel market participant activity levels
  • More banks may move to build out their private debt capabilities, imitating the successful private debt model that demonstrated its resilience through the current cycle
  • In a flat market, creativity will see lenders repurpose existing funding sources and develop new products to unlock liquidity
spiral staircase

Q&A explainer: Private debt in a changing market

  • Among alternative assets, private debt has matured rapidly and is enjoying a 'golden moment' as a markedly attractive floating-rate product
  • In 2024, a mounting interest burden will give rise to novel debt structures for LBOs
  • As a typical credit is held by a single lender or small club, the private debt model enables providers to move more quickly than their peers
  • Not wishing to miss this golden opportunity, investment banks are quickly establishing or building up their private debt desks, introducing another valuable option to the funding mix
city architecture

German debt markets ready to reset after a challenging year

close up of an office block

PE deal financing in 2024: Better times ahead?

  • After a challenging period for sponsor deal activity and limited access to finance, the outlook for the year ahead is improving
  • Expectations of interest rate stability are raising hopes that pricing and modelling capital structures will be easier and allow gaps in pricing expectations between buyers and sellers to narrow
  • High levels of dry powder and unexited assets will put structural pressure on managers to do deals, improving prospects for deal financing pipelines
  • Private debt has gained market share and will remain a key part of the acquisition finance mix, but loan and bond markets are rallying, providing sponsors with a wider set of financing options
modern glass skyscraper

Contacts

Hadrien Servais
Partner
Brussels
William Watson
Partner
Dubai
Yannick Adler
Partner
Frankfurt
Rebecca Emory
Partner
Frankfurt
Dr. Thomas Flatten
Partner
Frankfurt
Andreas M. Lischka
Partner
Frankfurt
Sebastian Schrag
Partner
Frankfurt
Vanessa Schürmann
Partner
Frankfurt
Gernot Wagner
Partner
Frankfurt
Güniz Gökçe
Association Partner
Istanbul
Ateş Turnaoğlu
Partner
Istanbul
Oona Lilja
Partner
Helsinki
Tanja Törnkvist
Partner
Helsinki
Lindani Mthembu
Partner
Johannesburg
Lionel Shawe
Partner
Johannesburg
Sibusiso Zungu
Partner
Johannesburg
Monica Barton
Partner
London
Christopher Czarnocki
Partner
London
Jeremy Duffy
Partner
London
Gareth Eagles
Partner
London
Martin Forbes
Partner
London
Emma Foster
Partner
London
James Greene
Partner
London
James Hardy
Partner
London
Colin Harley
Partner
London
Monica M. Holden
Partner
London
Richard Lloyd
Partner
London
Peter Mason
Partner
London
Shane McDonald
Partner
London
Anna Soroka
Partner
London
Fernando Navarro
Partner
Madrid
Jaime Rossi
Partner
Madrid
Stefano Bellani
Partner
Milan
Iacopo Canino
Partner
Milan
Gianluca Fanti
Partner
Milan
Michael Immordino
Partner
London
Andrea Novarese
Partner
Milan
Samir Berlat
Partner
Paris
Denise Diallo
Partner
Paris
Raphaël Richard
Partner
Paris
Neeloferr Roy
Partner
Paris
Tomáš Jíně
Partner
Prague
Jan Linda
Partner
Prague
Jonathan Weinberg
Partner
Prague
Michael Bark-Jones
Partner
Stockholm
Oscar Liljeson
Partner
Stockholm
Carl Hugo Parment
Partner
Stockholm
Magnus Wennerhorn
Partner
Stockholm
Grzegorz Abram
Partner
Warsaw
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