Direct lenders eye Italy market share

AS LENDERS watch Italy lurch through a banking crisis with dismay, Symon Drake-Brockman at Pemberton Capital Advisors LLP is readying his cheque book.

The London fund, along with a unit of Bain Capital LP, is among those lining up $50 billion for leveraged borrowers in Europe, including some shunned by traditional lenders, according to estimates by Deloitte LLP.

As European Central Bank (ECB) limits and the Italian upheaval curb risk appetite, directlending funds are seeking a bigger chunk of a market which grew by 37 percent last year to €145bn ($155bn), according to data compiled by Bloomberg.

“The recent bank crises open up new opportunity for funds to take market share,” said Drake-Brockman, managing partner at Pemberton.

Guidelines Draft guidelines on leveraged finance published by the ECB in November recommend lenders avoid underwriting deals where total debt is more than six times a company’s earnings.

The funds, beyond the remit of the ECB and capital rules aimed at limiting risk, have in some cases doubled the amount of cash available for direct loans.

Istituto Centrale delle Banche Popolari Italiane SpA, which sells support services to Italian banks, tapped Bain and other direct lenders for €600m of financing last year, said Tom Maughan, who runs European private credit at Bain Capital Credit LP in London, is targeting similar companies with speculative-grade ratings for direct loans.

“We can be more flexible and faster than banks when a company needs financing,” Maughan said. “Banking regulation and the new limits on leverage imposed by the ECB favour the switch from banks to direct lenders for mid-sized companies. It’s mostly happened in the US, but there’s more to do in Europe.”