Italian private debt issuance jumps 35% in 2017

A total of €641m in private debt was issued in Italy last year, a 35% increase on the €474m figure for 2016, according to a report by Deloitte in collaboration with AIFI – the Italian private equity and venture capital association.

Last year, 19 private debt providers were active in the geography – either fundraising, investing or both. A total of 82 corporates received some form of direct lending (including mini-bonds listed on the ExtraMot Pro) across 102 transactions. In comparison, there were 18 active lenders in 2016 that invested in 53 companies across 81 transactions.

In terms of debt instruments used in 2017, 65% were bonds, 32% loans and 3% hybrid instruments. In total, 80% of these instruments were amortising, while the remaining 20% comprised bullet payments. The three sectors in receipt of the highest number of private debt packages were industrial goods and services (23 companies), food and manufacturing (13 companies) and IT (nine).

Italy shows good investment opportunities and still enjoys more protective structures for lenders, compared with France, Germany and the UK" – Daniele Candiani, Deloitte

One in four issuers were private-equity-backed, and overall the average yearly turnover of each private debt recipient was €94.2m. The average interest rate paid on debt issued in 2017 was 5.71% and had an average tenure of 5.5 years.

Speaking to Unquote last year, Deloitte Corporate Finance partner Daniele Candiani said: "Italy shows good investment opportunities and still enjoys more protective structures for lenders, compared with France, Germany and the UK. Against this backdrop, and given the existing pipeline, the next six months are expected to confirm volumes and values reached in the same period in 2017."

Deloitte and AIFI have been monitoring the private debt market in Italy since 2014 and have identified a total of 24 providers over this timeframe – 67% domestic and 33% international. During this time, €1.6bn in private debt (including mini-bond issuance) has been issued across 175 companies with 54% of the companies generating less than €50m in revenues and in 63% of the cases employing fewer than 250 people.

Between 2013-2017 a total of €1.7bn was raised for private debt investing in the country, with more than 90% of the money coming from Italian sources. In terms of source, 27% came from banks; 24% from funds and institutional funds; 22% from insurance companies; 12% from high-net-worth individuals and family offices; 5% from pension funds; 4% from private funds-of-funds; and 1% from academic and banking foundations. In 2017 alone, €292m was raised for the region, with six funds announcing closes, down from the €574m in 2016.

Spain lags behind
Meanwhile, in southern Europe's other prominent market, Spain, the penetration of direct lenders has taken longer than expected. This is partly due to the fierce and continued competition from Spanish banks, many of which absorbed the Spanish saving banks – Cajas – after the crisis and are now keen to put their balance sheets to work again, says Deloitte's Iberian expert Aitor Zayas in another of the firm's studies.

Spanish banks typically offer senior debt leveraged at 3.5x at an average of E+ 275-325 basis points, lower than its counterparts in Europe. But despite the consolidation of the banking sector and cheap debt, club deals are still slower to put together compared to a direct lending solution; Deloitte therefore believes the Spanish alternatives market is gathering pace. Sponsorless deals will likely play an increasingly important role in the months ahead.

Between 2012 and Q3 2017, there have been 51 direct lending deals in the Spanish market. In Q3 alone there were six deals compared to three in the same period the previous year, and in the last 12 months the numbers were up 40% on the previous period. Though Spain notably lags behind other jurisdictions, in the last 12 months the region had 20 deals compared with 28 in Germany.

Direct lenders in Spain also face competition from MARF – an unregulated alternative fixed income market for larger mid-sized companies to access capital – akin to BondM in Germany and mini-bonds in Italy. There has been €4.8bn issuance to date and high-profile issuers include Spanish department store El Corte Inglés and international hotel firm Barceló.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Southern Europe
• Debt
• Top story
• Spain
• Italy
• Deloitte
• AIFI