Germany lenders positive on new business despite crisis

Despite the virus outbreak, banks and debt funds in Germany anticipate strong new business opportunities in 2020.

German lenders remain open for business despite the ongoing covid-19 crisis, according to a survey by investment bank GCA Altium.

The firm on 25 and 26 March interviewed 30 banks and 40 debt funds active in the DACH region to discover how their business was adjusting to the coronavirus, which has led to severe restrictions on individuals and companies across Europe.

Despite the lockdowns and the anticipated recession, 71 percent of banks and 78 percent of debt funds said they are able to make new primary commitments or present new projects to credit committees.

GCA Altium’s research also found that yields remain solid. A majority of banks said they were achieving margins of 350-450 bps on senior secured financing at 3.5x leverage. Almost one in six debt funds said their margin is 700-800 bps for a senior secured financing in an attractive industry at 5x leverage, while 32 percent achieve more than 800 bps.

Lenders are also making only limited adjustments to their financial covenants in response to the coronavirus. Just 7 percent of banks and 4 percent of debt funds will make coronavirus-specific adjustments, though 46 percent and 74 percent respectively said they would need to adjust a combination of factors in response to the crisis. One in three banks said they will make no adjustment to covenants and 22 percent of debt funds said the same.

Firms surveyed were also positive about their ability to do new business once the coronavirus situation eases. A huge 96 percent of banks said they will be ready for new business when the crisis ends, while 87 percent of debt funds plan to make new loans.