Regional Debt Guide: Nordics ‘last bank stronghold’

Banks remain strong in Scandinavia, so debt funds are having to learn to compete on their own terms.

In a market where the banks remain strong competitors, Nordic credit boutique Capital Four’s recent €1 billion first close on its latest senior debt fund shows appetite for direct lending is on the increase. Focused exclusively on first-lien senior secured bilateral financings in the Nordic, DACH and Benelux regions, Capital Four hit its target within six months of fundraising and says there is plenty of activity on its doorstep.

Founder and president Torben Skødeberg says that over the last year, activity levels in the liquid market in the region have become much slower, while the private debt market has stayed pretty busy.

“Private credit is now more mature and over the last three years we have been able to deploy exactly the amount of capital that we promised our investors we would deploy,” he says. “Our most recent senior fund deployed even in periods where the opportunity set in other markets was more limited.”

He says the banks remain active rivals – still very strong. Skødeberg says this will probably continue, but that it will only be an issue for fund managers that try to compete with them.

“If you offer the same terms with respect to pricing, covenants and leverage, then you don’t have a reason to win because a sponsor will go with the well-established banks,” he says.

“They are very strong in their own offering but it is not the same as what we can deliver in respect of speed, certainty of execution, maturity and leverage. We focus on the growth companies that you so often see in the Nordic region and we offer instruments and products that private equity can use as a tool to make those companies stronger.”

Nicolas Nedelec, managing director in private debt at Eurazeo, describes Scandinavia as “probably the last bank stronghold in Europe”, with the banks aggressively protecting their own turf. “We know that will change in time and we expect to do more deals there going forward. We were busy in that region last year and we see increasing levels of demand coming through,” he says.

Number of Nordic-based funds closed 2018-22

Total amount targeted by funds in market

February 2022
Stockholm based-ARCOS Capital launched an inaugural evergreen private debt fund with support from a small number of unnamed large institutional investors.

October 2022
Swedish SME lender DBT signed a deal with US-headquartered global credit investor Värde Partners and UK bank NatWest to lend up to SKr3.1 billion ($298 million; €273 million).

March 2023
Copenhagen-based debt investor Capital Four held a first close on its latest senior private debt fund on €1 billion.