Regional Guide to Europe: Nordics

From a slow start, debt is gradually finding its feet in the region as investors and GPs embrace the asset class.

The Nordic market has been slower to catch on to the private debt wave thanks to the strength of its local banks, but the asset class has witnessed something of a step change in activity in the past few years. Mikkel Sckerl is a partner with Danish debt fund Capital Four, one of the largest credit managers in the Nordics with a specific regional private credit focus. He says it is currently hard to keep up with the number of opportunities: “The asset class has been embraced both by investors and by private equity firms,” he says. “Most now consider this when they are financing acquisitions, and five years ago it was more sporadic in terms of dealflow.”

Data from GCA Altium records 17 senior and unitranche deals in the Nordic market in the first half of 2021, marking the busiest first half since it began keeping track in 2017 and topping the full-year figure of 15 deals seen pre-covid in 2019. Sweden and Denmark dominate the region, with 80 percent of closed transactions.

Sckerl says: “The banks still play a key role and do the majority of transactions, but part of the evolution in the past five years is that the capital we and others have is increasingly the right type of capital for the lower yielding senior deals that went to banks in the past. One reason we win deals when we are more expensive is because sponsors are looking to grow portfolio companies and execute on business plans, and what we do best is providing finance and underwriting growth plans with committed financing.”

Some 38 percent of the funds delivered by debt managers in the region in the first half of 2021 was for add-on financings, compared to 19 percent of deals for new primary financings.

Number of Nordics-based funds in market

Total amount targeted by funds in market

Paul Johnson, partner and head of direct lending at Bridgepoint Credit, which acquired EQT Credit last year, says: “There are 10 Nordic investments in our current direct lending fund and we are winning a bit more than our fair share in that market. Those tend to be slightly smaller transactions but for very active businesses; the region is particularly heavyweight in the healthcare sector, which has always been resilient and showed that especially during covid.”