Since 2018, European credit funds have fully or partially equitised at least 61 loans provided to companies backed by PE firms, according to ION Analytics’ Debtwire, which provides deal-making insights for leveraged capital markets professionals.
Of those 61 equitised deals, only five have been fully realised, leaving debt funds with 56 equity positions on their books at a time when exits are at a three-year low.
Debtwire’s new report analyses each transaction to form a clearer picture of key lenders and sponsors, as well as sectors and geographies with the highest levels of debt-for-equity swaps.
Prominent credit providers such as Goldman Sachs, KKR, and CVC Credit, among dozens of others, have participated in debt-for-equity swaps since 2018, taking full or part ownership of companies to which they had been lenders.
Last year saw a surge in debt-for-equity swaps, with at least 23 transactions taking place over a period in which interest rates reached the highest levels since the 2008-09 Global Financial Crisis.
According to Debtwire, the majority of equitised transactions recorded involved the private-credit arms of asset managers, while a minority of debt-for-equity swaps were carried out by CLO funds under their operations.
Most equitized loans were initially provided to private equity-backed companies, with only a handful of non-sponsor-backed transactions recorded, while consumer-related deals comprised the largest portion of swaps (more than a third of recorded equitised loans), with the industrials, business services, healthcare, and TMT sectors collectively accounting for the remaining majority of debt-for-equity swaps.
John Bringardner, Head of Debtwire, said: “For participants in Europe’s private-credit market, 2023 marked a record-setting year despite a dismal climate for M&A — the lifeblood of direct lending. In the background, elevated interest rates lifted private credit’s returns above private equities for the first time ever.”
