January 29, 2019 (London) – Proskauer’s market-leading Private Credit Group has today released its annual proprietary deal data report to the European market at a client event in London.

The report provides a real-time snapshot on the state of the credit markets through an in-depth analysis of deal terms contained in approximately 200 transactions the Private Credit Group completed during 2018. In Europe, the report showed an increase in continental private credit activity with 46% of transactions focused outside the UK.

"Never before have we seen so much flexibility than in the past 12 months," says Alex Griffith, partner in the Private Credit Group. "2018 was a ground-breaking year for borrowers. An oversupply of debt meant that borrowers were spoiled for choice and could negotiate more flexible terms than ever before. Not only has pricing been reduced but leverage has increased and lenders have had to provide additional flexibility on terms only previously available to large-cap transactions."

Liquidity in the market has turbocharged borrower terms, indeed Proskauer’s study shows that the percentage of private credit deals with EBITDA cures in Europe doubled to 25% in 2018.

Highlights from the study include:

• Scope: The study provides an examination of the 68 European transactions closed by the group in 2018, which involved 42 private equity sponsors with aggregate loans totaling over £18.6 billion.
• Interest rate margins: In 2018, average interest rates achieved by private credit funds held firm (at 6.3% in 2018 compared to 6.2% in 2017) although margins on regular unitranche deals fell decisively below 7%.
• Leverage: Average opening leverage in 2018 increased to 5.18 (from 4.79 in 2017)
• Tech: 34% of private credit deals were in the technology sector
• Financial covenants: 62% of private credit loans benefitted from just a single leverage covenant (typically with 30-35% headroom)
• Deleveraging: Excess cash flow sweeps are now seen on only 56% of European private credit transactions
• Portability: Only 10% of European private credit transactions allow the loan to be ported to new shareholders following a change of control

Proskauer’s Private Credit Group is a unique finance practice with more than 50 lawyers based in key financial centers in London, New York, Los Angeles and Boston. The team has consistently closed more than 150 deals a year and has been at the forefront of the development of the private credit market.