Alternative lending markets could boost eurozone recovery

Growth in alternative lending markets could aid economic recovery in the eurozone, according to regulators and politicians

A recent report published by rating agency Standard & Poor’s (S&P), entitled Alternative Lending Markets in Europe are Increasingly Open To Mid-Market Companies, analyses how increasing issuance of private funding for mid-market companies in Europe has attracted an increase in international borrowers.

According to S&P, issuance of private funding for mid-market companies in Europe grew last year to over €38bn. The analysis reveals that the European direct lending market alone has doubled in recent years; exceeding €10bn across more than 200 deals in 2014.

In the report, S&P states: “Given these positive market developments, expectations among regulators and politicians are high that alternative lending markets will support additional growth in Europe.”

But the rating agency cautions that growth is still very much dependent on the type and amount of funding available, and whether enough funding actually goes to support those companies with the highest chances of achieving growth.

Investor confidence is also an issue due to a number of uncertainties, including geopolitical risk, slow growth and the ongoing eurozone crisis.

S&P estimates that credit funds have raised a substantial €45bn of capital up to the end of 2014, which it expects to be deployed mostly in sponsor-led transactions.

Although this market is most active in London, the companies tapping into this capital are from a wide variety of countries in Europe, according to S&P.

The report states: “Based on conversations with market participants, we believe corporates raised more than €10bn in capital in 2014 across more than 200 deals, at least double the volume and value at the end of 2013, when we believe the total raised was closer to €5bn.”

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