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8 trends in Italian debt finance

We asked Daniele Candiani, Managing Director & Country Head of Italy at IKB about the state of the Italian financing market.

Panellists at Unquote’s Italian Private Equity Forum held a consensus view that whilst larger transactions may fall victim to the Brexit vote, there would be limited impact on mid-cap and small-cap private equity deals. Strong export prospects for medium sized businesses will continue to provide attractive opportunities as the growth forecast for the Italian economy is set to hit 1.2% in 2016, said speakers from HIG Capital, Essentia Advisory and Emisys Capital. 

Also a factor is the diversity of funding options now available to financial sponsors across the capital structure. Following Italy’s own recession earlier this decade, the releveraging of Italian portfolio companies only began around 18 months ago once the economy had turned a corner. 

Since then, private equity owners have remained disciplined and kept leverage at sensible levels compared to elsewhere in Europe which will help them weather any future economic downturn. 

A panel discussion chaired by Daniele Candiani, Managing Director & Country Head of Italy at IKB, summarised the Italian leveraged finance market: 

  1. The stabilisation of the Italian macro economic and political environment has led to an increase in leveraged buyouts. 
  2. LTRO funding led banks to increase their appetite towards leveraged finance transactions.
  3. Brexit is expected to have an impact on the European market activity especially for larger transactions, however smaller deals will likely be less affected.
  4. Leverage, quantum of debt and bullet tranches have gone up, almost back to pre-crisis levels.
  5. Underwriting is back and terms & conditions are clearly borrower-friendly.
  6. Smaller deals are getting done, with international banks active not only on large transactions.
  7. Deals are getting closed successfully (but sometimes in a longer time frame).
  8. 10+ private debt providers (Italian or foreign) have fundraised and are now full steam ahead. New Italian rules allow direct lending by alternative investment funds (‘AIF’) to Italian companies. However certain details of the new rules make the direct lending almost impractical. Therefore, alternative debt providers continue to use bonds to finance Italian companies.

Download the full presentation below.