France overtook the UK as the most active private credit market in Europe in the second half of last year, according to Deloitte, accounting for more than 30 percent of European deals and with deal volume up almost 40 percent on the same period of 2021. In part that shift says more about the issues in the UK economy, but there is nevertheless a movement towards continental transactions that is benefitting French credit funds.
Nicolas Nedelec, managing director in private debt at Eurazeo, says we are seeing a two-tier market. “In the upper mid-market, there are not many transactions being done and sponsors are hesitant to put assets up for sale, while at the same time some of the larger credit players have had difficulties fundraising and so are scaling back their investments,” he says. “Those funds have been less willing to buy market share by writing aggressive cheques.”
This contrasts with the lower mid-market for deals sub-€50 million, where there is still a decent flow of transactions coming from sponsors: “The banks may be there on a handful of deals but their involvement in the market right now is really not meaningful.”
Natalia Tsitoura, partner and head of European origination at Apollo Capital Solutions, says that historically French banks have been reasonably active and balance sheet heavy for some of the mid-market opportunities. “Pricing in France always used to be pretty tight,” she says. “We have seen the banks pulling back – not altogether, but definitely enough to create a greater opportunity for private debt. Over the last 18 months there has been a lot more focus on alternative capital.”
Geoffroi de Saint Chamas, head of France at Pemberton, says the number of opportunities today remains strong. “There has obviously been a slowdown compared to last year, but it is more the conversion rate of deals that has decreased and processes are taking much more time to complete. We continue to see a strong level of activity in our portfolio because there are plenty of add-on opportunities in the market.”
Number of France-based funds closed 2018-22
Total amount targeted by funds in market
France-headquartered alternatives investor Tikehau Capital saw deployment jump by 24 percent to €6.9 billion during 2022, with private debt accounting for 63 percent of capital deployed.
Societe Generale partnered with Tikehau Capital to launch SG Tikehau Dette Privée, a debt fund that enables private investors to invest in Western European SMEs committed to reducing their greenhouse gas emissions.
BNP Paribas Asset Management begun fundraising for its BNP Paribas European Enhanced Real Estate Debt Fund to take advantage of bank hesitancy to lend to commercial property.