Non-bank lending options for UK corporates—two years after Breedon

Non-bank lending options for UK corporates—two years after Breedon

In 2012 theBreedon review group reported on increasing therange of non bank lending options available to small and mid-sized UK corporates (‘Boosting Finance Options for Business’). Sophy Lewin, professional support lawyer in Slaughter and May’s finance team, considers whether, two years on, thenon-bank lending landscape has evolved to better serve theneeds of UK corporates.

Who are thekey players in themarket?

Banks

Bank lending remains suppressed compared to historic volumes, as banks deleverage against a background of increased regulation and higher capital requirements, including under Basel III. In 2013, according to European Central Bank data, net loan issuance to corporates in theEurozone was negative for thesecond consecutive year.

The government

Since thefinancial crisis, governments throughout Europe have recognised that thepromotion of non-bank lending is a necessary complement to traditional bank finance. In March 2014, theEuropean Commission announced that it is investigating thenon-bank lending market as a source of funding for long-term economic growth in theEurozone.

Non-bank lenders

Non-bank funding sources include insurance companies, pension funds, asset managers, hedge funds, and sovereign wealth funds. These institutional investors have funds to deploy and are keen to seek yields in a low interest rate environment. This is reflected in both thedevelopment of direct investment products by institutional investors and their increased participation in thesyndicated loan market. The same appetite for yield also exists for private investors, as seen in theenthusiastic take up of retail bonds.

SMEs

Evidence suggests that it is thesmall and medium-sized companies (SMEs) which have felt theeffects of thetightening of banks’ purse strings most acutely. Without ratings, they are unable to access thepublic bond markets. While large corporates are also looking to diversify their funding sources, it is generally theSMEs who have themost to gain from improved access to thenon-bank lending market.

What are thekey non-bank lending products?

Private placements

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About the author:

Meet Kate:

1. Banking & finance lawyer with experience in syndicated lending and project finance in London, Paris and Sydney

2. Likes yoga, DIY (although the output doesn’t generally reflect the input) and sunny climes

3. Thinks the law is very unlike how LA Law made it look

Kate is a solicitor specialising in banking and finance with particular emphasis on syndicated lending and project finance. She has acted for both borrowers and lenders on a wide range of finance transactions, often involving multiple jurisdictions.

Kate trained and qualified in the Debt and Derivative Securities team at Allen & Overy LLP. She later joined the Banking and Finance team at Freehills (now Herbert Smith Freehills) in Sydney. Most recently, she was in the Projects and Infrastructure team at Norton Rose LLP before joining LexisNexis. Kate is dual-qualified in England and Wales and New South Wales, Australia.