Germany lenders upbeat as terms tighten

Germany’s credit market appears to have recovered from the impact of covid-19 with almost all banks and debt funds saying they are open for new business, according to a survey by debt advisor GCA Altium.

The September survey found that 86 percent of banks say they are able to make new primary commitments while 92 percent of debt funds are able to make new commitments.

Pricing levels have also reduced after increasing during the worst of the pandemic. In May, 71 percent of banks said they were offering senior secured financing at 3.5x leverage for 400-450 bps but this fell to just 35 percent in September, while 62 percent of banks said they would price between 350 and 400 bps.

Debt funds are also offering cheaper loans with 59 percent saying they would lend secured senior financing at 5x leverage for between 600 and 700 bps, up from just 5 percent in May. Meanwhile, 68 percent said they would price at between 700 and 800 bps in May but this fell to 32 percent in September. Just 5 percent said they would price at more than 800 bps, down from a high of 45 percent in April.

However, leverage levels are lower with 54 percent of banks and 41 percent of debt funds saying they would lend up to 0.5x lower than before covid-19. Documentation is stricter as well with 60 percent of banks and 67 percent of debt funds saying documentation language is more lender friendly than before the pandemic.

Both banks and debt funds are positive about their pipelines for the end of 2020 with 77 percent of banks and 91 percent of debt funds saying they expect a busy Q4 with lots of new financing opportunities.