Private debt funds, asset-based financiers and family offices fill the gaps left by traditional bank lenders.
Sung Pak, who heads up the special-situations group at law firm Paul Weiss Rifkind Wharton & Garrison, advises all sorts of capital providers. They typically have flexible mandates and are actually “excited” about finding opportunities—even in tumultuous times, he says, adding, “Issuers and borrowers are understandably taking a ‘wait-and-see’ approach about more expensive capital generally, but deals are getting done.”
Another category is asset-based financing, an alternative for some businesses because it leverages the value in the assets that a company owns to create liquidity. For any company that might be nervous about cost of capital or “financeability” in this market, asset-based financing doesn’t fit into a typical mold—and that’s a good thing, Pak explains.
“Smart capital providers are willing to look at bespoke structures, whether that be recurring revenue deals or structured financings, that can replace or fit into cash-flow-based capital structures,” he says.
As specific needs arise, whether for working capital bridge financings, growth capital, acquisitions or approaching debt maturities, companies that are “fundamentally financeable” are often still able to field multiple financing bids.
This trend isn’t exclusive to the US. All across the globe, the private capital market is filling gaps left by traditional lenders. And in each jurisdiction, there are unique challenges specific to, say, the market for real-estate financings in China; the supply-chain financings linking Asia and Europe; or energy financings in Latin America, Pak adds.
“We do see a more developed market for deploying private capital in the US and, to a lesser extent, Europe, but private capital is more suited to providing capital solutions in challenging markets,” he adds. “We’ll be seeing the growth of private capital in all geographies sooner rather than later.”
There are other funding providers capitalizing on current market conditions as well.
Family offices, for example, have seen an uptick in popularity when it comes to M&A due to their flexibility.
They want to “innovate and make capital available,” Amax Capital managing partner Amit Thakur says.
Post time: Jan-12-2023