NEW YORK and LONDON, March 27, 2024 /PRNewswire/ -- ION Analytics, a global leader in services comprising news, data, analytics, and predictive capabilities for global capital markets, reports that, since 2018, European credit funds have fully or partially equitized at least 61 loans provided to companies backed by some of the biggest names in private equity. The statement is based on an analysis by ION Analytics' Debtwire, which provides insight into the entire deal making cycle for leveraged capital markets professionals.
However, of those 61 equitized deals, only five have been fully realized, leaving debt funds with 56 equity positions on their books at a time when exits are at a three-year low.
Debtwire's new report analyzes each transaction to form a clearer picture of a notoriously opaque part of the market, shining a light on key lenders and sponsors, as well as sectors and geographies with the highest levels of debt-for-equity swaps.
Prominent credit providers such as Goldman Sachs, KKR, and CVC Credit, among dozens of others, have participated in debt-for-equity swaps since 2018, taking full or part ownership of companies to which they had been lenders.
Last year saw a surge in debt-for-equity swaps, with at least 23 transactions taking place over a period in which interest rates reached the highest levels since the 2008-09 Global Financial Crisis.
Delving further into the data, Debtwire found:
- The majority of equitized transactions recorded involved the private-credit arms of asset managers, while a minority of debt-for-equity swaps were carried out by CLO funds under their operations.
- Most equitized loans were initially provided to private equity-backed companies, with only a handful of non-sponsor-backed transactions recorded.
- Consumer-related deals comprised the largest portion of swaps (more than a third of recorded equitized loans), with the industrials, business services, healthcare, and TMT sectors collectively accounting for the remaining majority of debt-for-equity swaps.
Debtwire is the industry's first end-to-end news, data, and analysis platform covering the entire deal making cycle for leveraged capital markets professionals. Debtwire identifies companies facing pressure to restructure using its proprietary likely-to-distress (LTD) score based on an AI-powered mechanism incorporating human insight, 30 years of data, and analytics, creating predictive analytics for debt issuers globally.
John Bringardner, Head of Debtwire, comments: "For participants in Europe's private-credit market, 2023 marked a record-setting year despite a dismal climate for M&A - the lifeblood of direct lending. In the background, elevated interest rates lifted private credit's returns above private equities for the first time ever.
"At Debtwire, we have followed the rise of 'key-takings' by lenders, which was a recurring theme throughout 2023 and continues into 1Q24," Bringardner continues. "Private credit proponents tout its ability to provide flexible solutions for borrowers, but when corporate distress strikes, direct lenders still often end up taking over the business. As loans issued during the 'golden age of private credit' begin to mature, we expect to see more alternative asset managers swapping their debt for equity - and looking for ways to exit those investments."
To download the full report, CLICK HERE.
About ION
ION provides mission-critical trading and workflow automation software, high-value analytics and insights, and strategic consulting to financial institutions, central banks, governments, and corporate organizations. Our solutions and services simplify complex processes, boost efficiency, and enable better decision-making. We build long-term partnerships with our clients, helping transform their businesses for sustained success through continuous innovation. For more information, visit https://iongroup.com/.
About ION Analytics
ION Analytics delivers personalized, targeted data and market intelligence to banks, investors, and corporates, helping clients find opportunities and drive better decisions in markets ranging from equities and fixed income to infrastructure and private equity. The ION Analytics platform brings together six unique, powerful services that span global markets making ION Analytics the only choice for capital markets professionals. For more information, visit https://iongroup.com/analytics/
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