Alternative Credit Investor | Covenant Breaches Decline for Third Quarter in a Row
Feb 2024
Originally posted by Alternative Credit Investor on February 22, 2024.
According to the Lincoln International Valuations & Opinions Group proprietary data, lenders and borrowers are proactively addressing potential defaults and thus fewer private equity (PE)-backed companies are breaching covenants.
Richard Olson, Managing Director in Lincoln’s Valuations & Opinions Group, commented, “Covenant breaches declined for the third quarter in a row, and lenders continued to support borrowers with amendments, as well as PIK pricing to conserve cash.”
European mid-market companies are also performing well. In an analysis of 300+ PE-backed businesses, Lincoln found that private credit fair values were mostly flat at 97.3 percent in Q4 and credits in stress / distress continued to be stable at 2%.
Richard said, “Transactions continued to get done for the small number of high-quality mid-market businesses put up for sale – in many cases with robust multiples – and debt has become more available both from credit funds and banks, with the limited number of new deals providing competitive tension on private credit pricing.”
Summary
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Lincoln International’s Richard Olson provides an update on the European private market.
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