Leveraged finance debt issuance has fallen off a cliff in 2022, with many market participants not expecting a rebound until sometime in 2023. In this article, Rob Mathews, Ben Bierwirth and James Tanner consider the current state of primary debt financial products with international appeal in the leveraged or acquisition finance context.
This article gives a snapshot of the current state of the primary debt financial products (bank debt, high yield (HY) bonds and direct lending) with international appeal in the leveraged or acquisition finance context, then considers alternate products that:
- Are available only in discrete (or local markets), such as the Schuldschein in Germany, Nordic Bonds in that region, the Sukuk in MENA and, particularly in more recently emerged markets like the CEE and CIS, local-bank-led credit facilities.
- Are seen (not always accurately) as being used only in specific circumstances or having complexity as a barrier to entry, such as securitizations, lombard loans, sale/leasebacks, real estate finance and ABLs/RBLs/CLOs.
In more detail
Global leveraged finance first choices – Bank/bond/direct lending
The primary sources of leveraged finance debt financing have evolved significantly over the last several years with the global emergence of the Term Loan B and movement of the direct lending market from discrete mid- and low-cap opportunities to a viable alternative for large cap deals (representing in some cases a substantial majority of the funds required to complete an M&A or private equity transaction). In this article we provide a high-level consideration to these products and some of their key current market features.
Other choices - Jurisdictional alternatives
Aside from the globally available choices, many countries or regions have developed and implemented unique debt products. Generally, these local financing options broadly provide for more streamlined and less onerous processes, although this may come at the cost of more onerous ongoing obligations or tighter covenants/restrictions.
Other choices - Specialist alternatives
In addition to regional products, another place to look for additional financing alternatives is products that are used in specific fact circumstances, to see if those products can be expanded into other areas.
This article was first published in IFLR.