Debt funds positive on Germany as lockdown eases

Debt fund managers and banks became more positive on their outlook for lending in April as the German government pilots its way out of lockdown.

More than 90 percent of debt fund managers in Germany believe they are in a position to make new primary commitments at the end of April, according to research by GCA Altium.

The debt advisory business surveyed 30 banks and 40 debt funds on their mid-cap financing outlook focused on the DACH region. It found that 65 percent of debt funds agreed they were able to make new primary commitments while 26 percent somewhat agreed. This is up from 26 percent and 52 percent, respectively, at the end of March.

GCA Altium said the increased positive outlook could be due to Germany and other states beginning to lift restrictions put in place to control the spread of the coronavirus.

Both debt funds and banks have seen margins increase, with 61 percent of banks reporting they can achieve 400 to 450 bps, up from 32 percent in March, while 14 percent now say they can achieve more than 450 bps, up from 4 percent in March.

Debt funds have also seen margins improve. In March, 32 percent of funds achieved more than 800 bps but this increased to 45 percent at the end of April. Half of funds can achieve 700 to 800 bps.

When asked if they agree with the German state development bank’s credit programme, fund managers mostly disagreed. When asked if they support the expansion of super senior revolving credit facilities through KfW’s credit programme, 59 percent of funds somewhat disagree and 6 percent disagree.

Both funds and banks are expecting to make commitments in the next month, with 71 percent of banks saying they expect to sign a commitment letter in the next four weeks, while 86 percent of debt funds expect to commit to lend.