Golub report finds strong growth, resilience
In January and February 2023, mid-market private companies in the US saw strong growth in both revenue and earnings across all four sectors tracked by the Golub Capital Altman index: consumer, healthcare, industrials, and technology.

Golub, a mid-market lender, released numbers from its index on 13 April 2023, using as a database the 110-115 companies in its loan portfolio.

The data suggests, in the words of chief executive officer Lawrence Golub, that “many analysts continue to underestimate the health of the US economy and the resilience of private equity-owned businesses”.

The standout sector for the first two months of the first quarter was technology, with year-over-year revenue growth of 15.5 percent, and a growth for earnings (EBITDA) of 19 percent.

Edward Altman, professor of finance, emeritus at the NYU Stern School of Business, said in a press release announcing the GCAI numbers and the release of the Golub Capital Middle Market Report, “Growth exceeded our expectations across all four sectors we track.”

There is some reason to be concerned about the consumer sector, though. Revenue grew in this sector because the “tailwind of falling energy prices more than offset the headwind of rising interest rates on mortgage and credit card debt,” Altman said.

Although revenue grew 10.6 percent YoY in the consumer sector, earnings grew by only 0.4 percent. The report refers to this as a “softness in consumer profit and cashflow growth compared to prior quarters”.

In the overall database, on the other hand, earnings grew 10.9 percent, nearly keeping up with revenue growth (11.1 percent). This earnings growth comes despite a strong labour market, which suggests cost control measures are working.

France takes top spot in Europe
France surpassed the UK to become Europe’s most active private debt market in Q4 2022, according to data from Deloitte.

In its latest Alternative Lender Deal Tracker update, Deloitte found that France recorded 50 deals in the final three months of last year, ahead of the 42 deals seen in the UK. This severs the UK’s unbroken streak of being the number one market for private debt deals since Deloitte began recording activity in Q4 2012.

The French market accounted for 28.1 percent of transactions in H2. On an annual basis, French deals increased by 31.9 percent, while Germany and the UK saw activity fall by 5.7 percent and 24.0 percent respectively.

Värde hails deep credit cycle
It’s what distressed and special situations investors have wanted for a long time: “real depth and persistence” in the credit cycle, as outlined in the latest Värde Views credit market update from fund manager Värde Partners.

In its update, Värde says its conviction has increased since the start of the year that the cycle will be deep, hailing it as “an incredible time to be a provider of capital and liquidity in credit markets”. The firm says the current level of stress and gaps in capital provision have not been seen since the global financial crisis.

Particular areas of opportunity highlighted by Värde include:

• Senior lending to facilitate refinancings, acquisitions and restructurings
• Gap capital in the form of mezzanine or preferred equity to bridge the void between senior lending proceeds and existing debt balances
• Special situations where current values break in existing senior or mezzanine debt and equity is out of the money.

Essentials