AlixPartners Mid-Market Debt Report H2 2020

March 10, 2021
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COVID-19 continued to have a dramatic impact on European mid-market debt in H2. Lenders reassigned focus towards a much narrower set of sectors, supported clients by deploying government-backed funding and worked through issues with existing clients.

After a year of once-in-a-generation GDP declines and with debt and working capital mounting, borrowers will need to consider all financing sources whilst ramping up profitability. Asset-based lending activity levels remain robust, while special situations teams at credit funds are also gearing up for increased activity.

The latest edition of AlixPartners' Mid-Market Debt Report, covers more than 100 bank and non-bank lenders active in the UK and European mid-market (debt transactions valued up to €300 million).

At a glance:

  • Overall activity levels in 2020 were 40% lower than in 2019. COVID-insulated sectors including technology and healthcare continued to thrive, though lenders’ appetite for COVID-impacted sectors was severely impacted.
  • Banks continued to manage portfolio issues and facilitating government lending during the second half of 2020. Banks are being extremely cautious before deploying new capital.
  • Fewer opportunities coupled with funds’ aggressive capital deployment targets is driving huge competition for the best credits.
  • Funds historically focused on vanilla direct lending are preparing for special situations lending through hiring externally, combining direct lending and credit opportunities teams, or even by acquiring funds with experience in special situations.
  • Asset Based Lending (ABL) activity remained robust, given the product’s suitability at a time where profitability levels remain uncertain.

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