NETHERLANDS Trends and Developments Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
• Default rates corporate defaults increased, particularly in highly leveraged sectors, and more restructurings were seen as the year progressed. Fitch Ratings projected default rates for European high-yield bonds and leveraged loans to rise to approximately 4% in both 2024 and 2025, compared to 2.5% and 3%, respectively, in 2023. This reflected a growing risk environment for lenders and investors. Market Overview Economic uncertainty resulted in lenders and borrowers adapting their financing strategies. While investor sentiment improved as rates began to decline, lenders remained cautious, maintaining a focus on high-quality credit, with more stringent due diligence and tighter cov- enants, closely monitoring the performance of (portfolio) companies to determine the impact of inflation, labour costs and supply chain issues. Increased due diligence and the need for lend- ers to assess and mitigate the potential risks associated with geopolitical events and eco- nomic changes pushed back the timelines for deal closures. In addition, commercial banks were faced with capital requirements that affect debt volume and the pricing. Many borrowers remained hesitant to lock in expensive financ- ing, and postponed planned debt financings or explored alternative funding structures. Vendor loans and subordinated financings (including Holdco financing or, in the private equity space, financings at fund level) and private credit solu- tions remained popular substitutes for traditional third-party debt in anticipation of better terms as central banks moved toward monetary easing. Deal activity in 2024 was a mix of “amend-and- extend” transactions and refinancings driven by upcoming maturities. As M&A-related financing showed signs of recovery later in the year, acqui-
sition finance also became a part of the mix. The economic situation led to borrowers being faced with higher borrowing costs and tighter credit conditions. Lenders, in exchange for waiving certain defaults, often imposed additional terms on borrowers, necessitating amendments to financing agreements. These amendments often involve agreeing to new financial ratios, addi- tional restrictions in the terms of undertakings, and extensive reporting requirements. Default rates increased compared to 2023, with more restructurings and bankruptcy filings as compa- nies struggled with higher debt-servicing costs. That said, defaults were not historically high. Liquidity challenges persisted for some com- panies, particularly for borrowers with float- ing-rate debt. Many of them sought additional financing, either by expanding credit facilities or securing new credit lines. However, obtaining such financing typically comes with additional lender conditions, and shareholders are also often expected to inject additional equity. When shareholders do not cooperate, traditional lend- ers typically sell their commitments, while direct lenders will stay, take the equity and take control of the company. If the shareholder and existing lenders do not want to provide additional fund- ing or are not willing to take the company over, secondary trading remains essential to securing new credit. In urgent situations, traditional lend- ers will sometimes resort to private debt as a form of rescue financing. A current concern is the 2026 maturity wall and the struggle that companies are experienc- ing refinancing their existing debt. Restructur- ings are expected to become more complex as there are many stakeholders with different interests involved. An uptick in “multi-process” restructurings – where processes in two or more jurisdictions are necessary to implement a single
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