In ‘The rise and rise of non-bank lenders’, London-headquartered DC Advisory argues that “non-bank lenders have taken a significant share of medium and long-term lending from banks”.
“In long term infrastructure deals, the UK and continental European banks have almost completely retreated”, the report added.
Citing its own in-house data, DC said the percentage of mid-market buyouts featuring non-bank lenders had risen from 17 percent in the 12 months to 30 September 2011, to 31 percent in the same period last year, and 46 percent this year.
It attributed the rise to four factors: quantitative easing programmes by central banks; withdrawal from lending by the banks as they seek to delever their balance sheets; prolonged low interest rates driving investors to search for yield elsewhere; and a reallocation of capital from equities to fixed income products.
Jonathan Trower, managing director at DC, wrote in the report: “We think the rise of non-bank lending in the leveraged and infrastructure mid-markets is a seminal shift. Not only has the amount of money looking for a home increased, but also borrowers are gradually being weaned off an almost exclusive reliance on bank providers. This can only be good for the market. As competition increases so the pricing and flexibility of terms improve.
“We have talked for many years about the possibility of an investment / cross-over grade private placement market developing in Europe. Maybe the next steps on the journey away from a bank led financing market will be for European managers to extend their offering from the leveraged into the corporate market reducing the reliance of FTSE 250 companies on US based private placement investors.”