A resilient and bullish M&A market together with record amounts of dry powder, particularly with Asia-focused private equity funds, should see the continuation of the strong leveraged finance activity we witnessed in the latter half of 2021. Greater competition from both bank lenders (notably PRC and Taiwanese banks) and alternative capital providers has boosted liquidity, driving greater leverage and competitive covenant packages and pricing. Given solid lending appetite across the capital structure, buy-side sponsors have been able to offer higher bid prices and in certain processes on a certain funds basis. This demand, in conjunction with sell-side sponsors looking at portfolio exits at attractive valuation multiples, bodes well for leveraged buyouts in 2022. As with other areas of debt and capital markets, we expect ESG considerations and sustainability linked lending to be a prominent feature in leveraged financings.
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