European Direct Lending Forum

Direct lenders emerged from 2020 fairly unscathed, with many having experienced their busiest few months yet. A growing number of managers are targeting the large-cap space with ever larger funds. Differentiation remains a hot topic, especially as lenders focus their efforts on safer assets more resilient to the COVID downturn.

The first wave of the COVID-19 pandemic provided the first big test for direct lending’s health as economies locked down to prevent the spread of the virus and deal flow dried up. However, following the initial challenges, most direct lenders seemed to have not only escaped relatively unscathed but are investing at a rapid pace as they rush to deploy as further waves of restrictions come into force. We will explore how direct lenders can capitalize on opportunities between periods of instability as well as how fundraising is being impacted.

Leverage became a necessary tool for European direct lending funds as spreads tightened, but leverage facilities came one with stringent investment and diversity criteria. As distress in the market grows how are banks managing their risks? Do existing facilities give managers enough flexibility to manage their portfolios in stressed situations? And what are the current terms in the market for a fund looking to add leverage for the first time.

Until 2020 much of the European direct lending market had yet to face a downturn given the asset class’s relative immaturity but the COVID-19 pandemic has provided an economic test for many. This panel will consider the experiences of funds dealing with stressed situations in their portfolios and how they have approached potential workout scenarios.

The US private debt markets have a decade-long head start on their European counterparts, so it’s only natural that market participants in Europe look west for clues to their own future developments. Our panel of US middle market specialists will explore some of the recent trends they’ve been seeing that they think might cross over to Europe, as well as casting an outsiders gaze over the current state of the European direct lending space.

The onerous reporting requirements for European ABS under ESMA are well known, but many direct lending funds can also fall foul of the new rules once they add leverage to their fund structure. In this masterclass our experts will describe when a private debt fund count as a securitization, and what steps a manager needs to take to be in compliance with the ESMA rules when that happens. They will also explain what this means for investors looking at US private debt funds.