Private debt deal flow has been strong over the first half of 2018, despite concerns that managers are struggling to put capital to work after 2017’s record-breaking fundraising year. Q1 2018 saw a 26% increase in the number of private debt deals when compared to the same period in 2017 and, despite a fall in the number of deals in May and June, the number of transactions is at a similar level to H1 2017 – as seen in the chart below.
The flood of capital into the asset class means that private debt managers have more dry power to play with than ever before: Preqin’s data shows that at the beginning of August, the amount of dry powder available to managers stood at $252bn. Despite the concerns, 2018 has so far shown that managers are putting that capital to work. Preqin’s data shows that $24bn in private debt capital was provided to businesses in the first half of 2018, down 27% when compared to the same period over 2017 ($33bn). However, this can largely be attributed to some large transactions taking place in H1 2017, including Antares’ $1bn unitranche facility provided to private equity-backed Boyd Corporation, in comparison with a significant decrease in the number of deals over the same period in 2018.
The number of private debt deals completed in North America in H1 2018 is down by only 3% when compared to H1 2017, and the number of European deals is down just 2% over the same period. Interestingly, the number of deals that took place outside Europe and North America has stayed the same, as private debt still looks to make headway outside the more traditional markets.
Preqin’s private debt deals data shows that managers can put investor capital to work despite the concerns over the high levels of dry powder and deal flow in Europe. Greater assets under management will also mean that private debt managers can compete with banks when it comes to financing the larger deals, widening their investment scope and helping ease potential worries concerning deal flow.