Welcome to the March edition of In the Know, Baker McKenzie's Leveraged Finance newsletter that analyzes significant trends and salient legal issues for participants in leveraged finance and high-yield markets around the globe. In this edition we look at debt financing in a challenging but striving UK P2P market.
Whilst M&A activity has generally been subdued over the last 12 months or so, there has been a steady and perhaps increasing number of acquisitions of UK public companies with a view to take them private (UK public to private or "UK P2Ps"). This has been driven in part by the favorable US dollar to GB pound exchange rate, and in part by flat valuations in certain sectors.
Corporates and sponsors looking to debt finance those acquisitions have faced the same challenges as issuers for private M&A, in particular the higher cost of capital and more cautious underwriters not wanting or willing to take lengthy balance sheet risk in committed financing. Nevertheless, a number of UK P2Ps have been debt-financed in recent months, taking a variety of different approaches to find financing solutions.
In particular, we explore the following:
- UK P2P financed in USD
- Certain funds – drawstops and syndication