NETHERLANDS Trends and Developments Contributed by: Folko de Vries, Clifford Chance
Growth of Private Credit The private credit market has seen remarkable growth in the Netherlands and in the Benelux as a whole. The first private credit transaction in the Netherlands is generally considered to have been done in 2014. Just over ten years later, the private credit market now accounts for almost 80% of leveraged finance transac - tions in the Benelux, according to the Houlihan Lokey mid-market monitor. Following the global financial crisis, banks became subject to stricter regulations, which forced them to take a more conservative approach to lending, meaning that borrowers needed alternatives. Private credit providers, which are not subject to the same strict regulations, provided an alternative. In the Netherlands private credit financing was initially considered by some market participants to be expensive debt and it was not until sponsors were comfortable with the higher leverage and the ability of private credit providers to provide incremental debt for M&A activity and other investments that the private credit market start - ed growing significantly. A large number of private credit providers is or has been active in the Benelux. Some of them have a local presence and some do not. Almost all of them (if not all of them) look at the Ben - elux as one market in the sense that the same team covers each of the relevant jurisdictions within the Benelux. Belgium and the Netherlands are relatively obvious choices for private credit providers wanting to roll out European capital deployment given the sophisticated and cred - itor-friendly legal systems in both jurisdictions, which do not involve prohibitive transaction costs or regulatory restrictions. Terms for private credit transactions in Belgium and the Netherlands are not hugely different from terms for private credit transactions in the UK,
and differences between terms are more reflec - tive of the size of the transaction, the sector in which the borrower operates and the competi - tion between private credit providers. The private credit market in Belgium and the Netherlands is part of a larger international market. A McKinsey study suggests that the size of the private credit market in the US alone could grow to more than USD30 trillion, from approximately USD2 trillion at the end of 2023. Relationship Between Banks and Private Credit Providers The growth of the private credit market does not mean that there is only competition between banks and private credit providers. Although sponsors in Belgium and the Netherlands will also still often benchmark various financing solu - tions, such as bank club deal financing against private credit solutions, there seems to be a par - ticular competition between private credit and broadly syndicated loans. Following the US, the re-opening of the syndicated markets in Europe has led to refinancings of private credit deals and private credit solutions needing to be more competitive on pricing and terms. Banks needing to take a more conservative approach to new loans to businesses have built strong capability to provide leverage to private credit providers in addition to providing fund financing solutions to sponsors. There is also collaboration between banks and private credit providers as borrowers typically require working capital financing alongside term debt, and this is typically provided by banks through a super senior revolving facility, sometimes combined with a limited allocation of super senior term debt. This is particularly popular in the Netherlands due to the reduced weighted average cost of capital, and is often
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