Ocorian: Private credit competition is set to intensify in Europe
New research with private credit executives shows they expect competition in the sector to increase across Europe and in their own region, with covenant headroom rated as the most important competitive factor.
The study from Nordic Trustee, part of global capital markets services provider Ocorian, with private credit executives across the UK & Ireland, Germany, Switzerland, Benelux, the Nordics and Eastern Europe found 28% say the European direct lending market is currently highly competitive.
More than two-thirds (65%) questioned believe the market is only moderately competitive while 7% say competition in the sector is limited, the study with professionals working across private credit and debt fund management, private equity and large corporates that use private credit as a source of funding, and debt advisory firms.
However, the research found that they expect the level of competition to increase over the next three to five years both at a European level and in their own region. More than four out of five (81%) believe competition at the European level will increase with one in seven (14%) predicting it will increase significantly. In their own region 85% say competition will increase with 41% predicting significant increases.
Substantial covenant headroom was identified as the most important competitive factor in the study, which asked executives to rate their top three most important factors ahead of attractive durations and the lowest possible credit margin. The highest possible leverage was rated ahead of tailor-made credit structures in fourth and fifth place with simple security packages ranked ahead of no amortization and/or PIK interest and no or limited dividend restrictions which was rated last.
