Debt Finance Series: The Future Of Debt Finance

• Published date: 21 October 2020
• Subject Matter: Finance and Banking, Insolvency/Bankruptcy/Re-structuring, Debt Capital Markets, Financial Services, Financial Restructuring, Insolvency/Bankruptcy
• Law Firm: Ocorian
• Author: Mr Alan Booth

Private equity firms have largely been closed off from government support in the UK context, and are in many cases heavily exposed to sectors like retail and hospitality that have been severely impacted by the pandemic. We are seeing a sizeable increase in the number of restructurings and defaults and in our London team we significantly bolstered our restructuring expertise at the start of the year to help with that.

We are very focused on helping private equity and their underlying portfolios to come out the other side of the current economic challenges. Within that market, we are seeing a number of fundamentally strong portfolio businesses going through restructuring and workout scenarios, and we have been involved to some extent with a number of restructurings that were private equity supported, or working their way through refinancing.

Come Q4, I think we are going to see a crunch, with our colleagues in the legal market and the distressed advisory market starting to plan for a wave of restructurings going into 2021 and 2022.

An omen for 2021?

Looking at equity finance, it is likely that new share issuance will continue and might be ideal for corporates that have robust balance sheets. On the debt finance side, debt is relatively cheap at the moment so that's certainly going to continue at pace, with debt issuance set to increase significantly in 2021, though that largely depends on how long covid-19 is going to be with us.

There's going to be wider industries that just will not come out well post-covid because of people's behavioural changes, particularly relating to work-life balance. The likes of Pret A Manger will need to restructure as a result and will come back with a different shape and scale.

The debt funds are well-positioned and debt finance...