Notwithstanding global macro headwinds, lenders are confident in availability of capital to lend and have cited healthcare, technology, agribusiness & food, and financial services as attractive sectors, writes Hazel Cryan, Head of Debt Advisory, in KPMG's Irish Corporate Lending survey.
Hazel Cryan
Partner, Corporate Finance
KPMG in Ireland
The rise of alternative lenders
High street lenders continue to be active, competitive and play a central role in the Irish lending landscape. However, 96% of corporate lenders surveyed believe that alternative lenders, will have an enhanced role to play in 2022.
“It’s great to see the continued depth and diversity of the active lenders across the Irish corporate lending landscape” said Hazel Cryan, Head of Debt Advisory at KPMG Ireland.
Historically, we have seen alternative lenders predominantly offering higher-cost and higher-leverage lending, whereas now, alternative lenders are increasingly seen as competing with high street lenders having shifted down the risk curve to address demand for alternative senior lending products.
Drivers of lending activity & the impact of COVID-19
Alternative lenders have identified M&A activity as the primary driver of this growth, with over two-thirds (67%) stating it as their number one expected activity in 2022. This compares with just 17% of high street lenders, who identified expansionary capital expenditure and refinancing existing debt as their main two drivers of lending activity in 2022, with approximately one-third (33%) each.
“We saw borrowers supported by their lenders through the pandemic with payment breaks and covenant waivers, as the winding down of COVID-19 business supports continues, it is positive to see that distressed debt and restructuring counted for a small proportion of expected lending activity.” said Hazel Cryan.
“The Irish banks are critical funders of M&A and are the first port of call for most borrowers. The growth in capital available to deploy by alternative lenders has widened the options open to deal makers, particularly when higher leverage or enhanced flexibility is required to get a deal done. We have also seen asset backed lending being used very effectively to support MBOs and transactions across a range of sectors” said David O’Kelly Head of M&A at KPMG Ireland.
The Irish banks are critical funders of M&A and are the first port of call for most borrowers. The growth in capital available to deploy by alternative lenders has widened the options open to deal makers
Environmental, Social & Government (ESG)
Over 80% of lenders surveyed said they were actively looking for ESG linked lending opportunities, with over 85% of lenders having an established or in progress ESG lending framework.
Over 75% of alternative lenders have an established ESG lending framework compared to 50% of high street lenders. 83% of both high street and alternative lenders are willing to link ESG targets to pricing.
“ESG is an increasingly important agenda item for both lenders and borrowers, with many lenders publishing green lending frameworks. It’s positive to see the corporate lending sector playing its part in this and actively working towards a greener future by rewarding sustainable projects and activity”.
One of the core objectives of EU climate policy is the redirection of capital flows. As such banks and other lenders are being increasingly influenced by rules and regulations which in time will make it harder and more expensive to lend to unsustainable businesses and sectors, while making it cheaper and easier to lend to sustainable enterprises.
Get in touch
If you have any queries on the findings of our Corporate Lending Survey, please contact Hazel Cryan, Head of Debt Advisory. We'd be delighted to hear from you.
