BELGIUM Trends and Developments Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
Relationship Between Banks and Private Credit Providers The growth of the private credit market does not mean that only banks and private credit providers compete. Although sponsors in Belgium and the Netherlands will also still often benchmark vari - ous financing solutions, such as bank club deal financing against private credit solutions, there seems to be a particular competition between private credit and broadly syndicated loans, in particular for large cap transactions. Following the US, the re-opening of the syndicated mar - kets 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 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, in Belgium and the Nether - lands. 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 fund’s 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
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