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Debt Capital Markets Review Autumn 2018

11 October 2018

Gambit Corporate Finance LLP announces the publication of its Debt Capital Markets Review for Autumn 2018

Executive Summary:

  • The macroeconomic environment remains strong with global growth of 3.7% forecast in 2018 and 2019 by the OECD.
     
  • The UK economy has continued to show resilience in the face of uncertainty surrounding Brexit. The economy is forecast to grow at a rate of 1.3% in 2018 and 1.2% in 2019.
     
  • Interest rates in key economies are predicted to continue rising gradually. Whilst rising interest rates are typically unfavourable for borrowers, interest rates do remain low by historic standards.
     
  • Brexit remains a risk factor within the credit market and a speedy resolution could lead to an increase in demand for credit.
     
  • Multiples for transactions across the SME and mid-market sectors have continued to rise due to the high level of cash on corporate balance sheets, the amount of investable capital in the hands of financial investors and the availability of credit.
     
  • Leverage multiples have remained at similar levels to the end of 2017, with 6x EBITDA being common place for larger private equity transactions.
     
  • The alternative funding industry is yet to mature, with a growing number of lenders entering the market over the last year. Private debt funds alone raised over $20bn in 2017.
     
  • The level of credit and the increasing competition between alternative funders has led to ‘covenant lite’ loans becoming more prevalent.
     
  • The use of alternative funders within the UK has grown, however there remains a general lack of awareness of the various funding solutions available.
     
  • September 2018 marked the 10 year anniversary of the collapse of Lehman Brothers, an event that transformed the banking landscape, resulting in differing business models and greater competition from alternative funders.

To read the full report click here