The German private credit markets reported 53 transactions in the first half of 2022, up from 41 in the same period last year and a 13 percent share of the European market, according to Deloitte’s Alternative Lender Deal Tracker. Debt funds and banks were both pretty active in the second quarter, with 48 percent of the deals done by banks as they confirmed that they remain open for business, shows Houlihan Lokey data.
Number of funds focused on the DACH region to close since 2017
Total amount targeted by DACH region-focused funds in market
Mattis Poetter, co-CIO at European fund manager Arcmont, says: “The German private debt market remained active in the first half of 2022. While direct lenders have become more cautious in certain sectors, including consumer and industrials, general activity levels have remained high.”
This, he says, could be seen as a “testament to the resilience of private markets” in comparison with the increasingly volatile public markets. Poetter says a particularly active sector for private debt in Germany is healthcare services, which remained the case this year with a number of deals done in the sector in recent months.
“Many borrowers are turning to private debt as a long-term reliable financing partner, which has opened many opportunities for direct lenders to invest in large high-quality companies at attractive terms. In particular, pricing and leverage levels have significantly improved in response to public market volatility and the lack of alternative sources of capital available to borrowers.”
Jakob Schramm, partner and head of private credit at Munich-based Golding Capital Partners, adds: “As the liquid markets have been less available to borrowers, a significant market opportunity has opened up for private credit, often at meaningfully better pricing than before.”
While Germany is particularly susceptible to the impact of cuts to Russian gas imports, which accounted for 55 percent of the country’s gas consumption in 2021, that vulnerability is yet to impact credit portfolios.
Schramm says: “So far private credit portfolios have been very stable across the board. Even if some companies are seeing some challenges, most direct lending GPs have structured their loans with sufficient buffer to withstand some short-term softness in operational performance.”