NETHERLANDS Trends and Developments Contributed by: Folko de Vries, Clifford Chance
also required to incentivise banks to provide the working capital financing, as the regulatory treatment of that financing may mean it is oth - erwise not economically attractive for a bank to provide. Both in Belgium and the Netherlands we also see limited allocations of senior term debt to banks providing working capital financ - ing, but that is less common. The collaboration sometimes even extends to both banks and pri - vate credit providers providing senior term debt and banks, through their asset-based lending affiliates, providing asset-based working capital financing. In addition to a lender-borrower relationship and collaboration on transactions, we see banks starting their own private credit fund or becom - ing an important investor in a private credit pro - vider. The stricter regulations to which banks have become subject not only force them to take a more conservative approach to new loans, but may also result in banks offloading existing loans or loan portfolios, including in Belgium and the Netherlands. Although there is collaboration between banks and private credit providers on transactions, access to working capital financing alongside a private credit solution can still be challenging for sponsors. We have not yet seen partnerships between local banks and private credit providers in Belgium and the Netherlands. Sponsors typi - cally negotiate terms with a private credit provid - er first and seek to onboard one or more banks as super senior working capital providers after agreeing terms with a private credit provider. For this to work from a certain funds perspective, private credit providers will typically provide a revolving facility bridge for a short period after the closing of the transaction. Such bridge would
either be replaced with the bank working capital financing, disappear or be rolled into the senior term debt. For a sponsor, this introduces some uncertainty and the risk that certain terms need to be further negotiated (and therefore may dete - riorate from the sponsor’s perspective) in the super senior lender onboarding stage. For vari - ous reasons (including banks retaining access to customers), market participants generally expect to see more tie-ups between banks and private credit providers. We may also see private credit providers offer working capital financing for a longer tenor, rather than as a short-term bridge. Developments and Challenges The continued record capital raises by private credit providers result in increased competition for opportunities to deploy capital and in private credit providers looking at other opportunities to deploy their capital. Private credit providers have now also become active in providing fund financing to sponsors; private credit providers offer infrastructure financing and co-investment structures for limited partners. Although spon - sors and private credit providers may be more comfortable with increased leverage if inter - est rates are reduced and this may increase demand, it does seem generally expected that there will be consolidation in the private credit market. Reduced interest rates may also impact the yield expected by investors in private credit. Restructuring and Insolvency One concern raised by sponsors before private credit became a household financing solution was that sponsors did not have experience with how private credit providers would act in a financial restructuring or work-out scenarios. Even if private credit providers are quite selec - tive in deploying capital, their market share sug - gests that their involvement in such scenarios
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