The 2008 financial crisis marked a turning point in a traditional financing model, in which commercial banks had a fundamental weight, giving way to alternative sources of financing, such as Direct Lending or private debt funds. The constant search for financing to obtain liquidity has led companies, especially those of small and medium size in need, to seek refuge in private financing in order to survive.

What at first seemed to be presented as a complement to bank financing, has ended up becoming the preferred instrument for companies, who choose to directly obtain financing from private funds, without going through banks, causing a phenomenon known as “bank disintermediation ”.

Direct Lending (DL) funds are characterized, above all, by offering longer-term loans (up to 7 years), by giving greater flexibility in the conditions to the borrower (including repayment) and greater speed when making the loan. operation of what a commercial bank can give. DLs are often willing to make loans at higher multiples of Ebitda.

The repayment term offered in non-bank financing is also longer. Furthermore, while banks are limited and regulated by monetary and banking regulations, causing hardening of financing conditions, Direct Lending funds are not subject to this type of regulation.

For its part, in terms of the cost of financing, banks continue to have a lower price than Direct Lending. Leveraged loan banks operate with an interest rate of between 3.5 and 6%, that is, in the range of spreads of 350bps-600 bps, while most direct lenders have interest rates above 5 , 5% (+550 bps margin).

According to data published by Prequin in February of this year, capital raising for direct loan funds increased by 62% since January 2020. The Direct Lending funds were intended to allocate $ 150.3 billion for these types of mandates. as of January 25, with 266 funds in the market, compared to $ 93 billion in 204 funds as of January 2020.

According to the report ´Alternative Lender Deal Tracker Autumn 2020´, prepared by Deloitte, in the last 31 quarters a total of 2433 Direct Lending agreements were registered in Europe, of which 880 were in the United Kingdom and 118 in Spain.

The fact is that Spain is becoming one of the most important investment centers for debt funds, which see great business opportunities in their market. Large funds such as Blackstone, KKR, Sherpa Capital or Tikehau have already carried out operations in our country; And not only that, Spanish firms such as Oquendo, Alantra or Trea also offer loans of this type.

We are facing a reality in which banks are in a progressive loss of market share as a source of financing, compared to private debt funds in which more and more millions are invested and are expected to invest. There are exceptions; Santander bank, for example, is adapting to this new scheme. Proof of this is the debt fund itself created by this bank, the so-called Smart Santander Fund, or Tresmares.

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