Real Deals | Roundtable: Mid-Market Debt Open for Business

Jul 2024

Originally posted by Real Deals on July 17, 2024.

Dividend recaps are being considered as an interim solution to deliver capital to limited partners due to fewer exits and improving financing conditions.

“While interest rates have not decreased as rapidly as anticipated, the ECB made its first 25 basis points cut in June, and the bank of England might follow suit later in the summer,” Aude Doyen, Managing Director and co-head of Lincoln’s European Capital Advisory Group, commented. “Margins have also tightened significantly and leverage has edged higher since the start of the year.”

Defaults have been lower than many predicted. According to the Q1 2024 Lincoln Private Market Index, approximately 16% of the portfolio companies Lincoln valued negotiated an amendment for the 12 months ending in March 2024.

“This suggests that sponsors, lenders and advisers are finding ways to avoid defaults by addressing potential issues before they crystallize, although amendments may also be for positive reasons such as repricings and add-ons,” Aude said.

As a result of challenges, the market offers other liquidity solutions such as NAV loans, continuation funds, minority stake sales and dividend recaps (as mentioned above).

Aude said that the past 18 months have opened GPs’ eyes to other liquidity solutions, and thus have created new private credit as well as private market opportunities.

View additional insights in the original article.