Germany Forum 2017 preview: Defying volatility

Jiri Krol, deputy CEO of the Alternative Credit Council, argues for private debt’s resilience and believes Brexit has a ‘silver lining’.

Regardless of the weather outside, it appears that Jiri Krol is determined to bring rays of sunshine to the PDI Germany Forum in Munich next week. “This year is the year of private credit going truly global,” he confidently asserts. “Europe is fully on board not just in terms of number of deals, but recognition of the asset class; and, in Asia, deals are reaching meaningful levels. This is the basis of the celebration I’d like to indulge in at the Forum.”

Krol is deputy chief executive officer of the Alternative Credit Council, a part of the Alternative Investment Management Association (AIMA) which represents private credit and non-bank finance providers globally. He will be making a key presentation on the opening morning of the event on June 20.

Sunny dispositions have not been in much evidence lately, partly as a result of developments in the UK where hugely complex Brexit negotiations appear to have been made all the more challenging as a result of the hung parliament that resulted from last week’s general election. However, Krol remains steadfastly optimistic:

“With Brexit, we may see a silver lining,” he says. “People on the continent are now realising you can’t rely on the UK as the banking hub and centre of capital markets. That provides a greater urgency to develop non-bank sources of lending. With the UK outside of the single market, the continent will need to develop its capital markets more.”

He also insists that the advance of private debt will not be derailed by a volatile environment. “I don’t think the current political situation will disrupt the deep structural issues that have made private debt extremely successful,” he says. He points to the impact of banking regulations, the familiarity and trust that alternative lenders have gained and the ‘lower for longer’ interest rate environment as three factors meaning that private debt is “here to stay, develop and deepen”.

Krol says the ACC’s priorities vary in different parts of the world. In Europe the focus has been on regulatory reform, particularly in relation to securitisation and trying to ensure that the risk retention requirement for CLO managers does not go above 5 percent. In Italy, the organisation has been working with the authorities on withholding tax and making sure that restrictive measures applied to domestic funds don’t also hamper cross-border lending activities.

In the US, the ACC has been playing a role in the push for business development companies (BDCs) to be able to use more leverage. “I was in DC in the past week meeting with regulators and policy makers to see how we could modernise the BDC regulation and increase the capacity for BDCs to lend,” Krol reveals.

In Asia Pacific, meanwhile, the focus has been on bringing the private debt community closer together, undertaking in-depth research and shining a light on the asset class given that it is still at a relatively nascent stage of development in the region.

At the Forum, Krol says he will be interested to hear views on how the ACC can help to further reduce bottlenecks. There will likely be no shortage of delegates queuing up for a chat – especially those keen to hear upbeat views from someone seemingly determined to defy the gloom.