Data are from AIFI, the Italian Association of Private Equity, Venture Capital and Private Debt, with support from CDP and Deloitte
The first half of 2023 for private debt funds in Italy ended with a slight drop in investments to EUR 1.328 billion, down 7% from the EUR 1.433 billion in the first half of 2022 (revised from the first estimate of EUR 531 million, see here a previous article by BeBeez), while in the whole year 2022 investments had grown by an impressive 43% to EUR 3.224 billion from EUR 2.261 billion in 2021 (see here a previous article by BeBeez).
This is shown by the six-monthly survey by AIFI, the Italian Association of Private Equity, Venture Capital and Private Debt, in collaboration with CDP and Deloitte, recently published (see here the press release and here the presentation slides by Alessia Muzio, head of the AIFI studies and research office), which also highlighted a decrease in the number of companies invested to 46 (-37%) from the 73 companies in the first half of 2022, and a sharp drop in the number of investments to 68 (-50%) from the previous 137, and on the other hand a slight increase in the amount of redemptions to EUR 127m (+10%) from EUR 116m, relating however to 66 companies from the 93 companies of 1H2022. But above all, data show a significant drop in inflows to just EUR 316m, down 23% from H1 2022, when it had been EUR 410m (again, revised from the first estimate of EUR 440m, see the presentation slides for H1 2022 here).
As usual, the AIFI-CDP-Deloitte data refer only to the activity of institutional operators operating in the private debt segment. They exclude digital lending platforms, banks, transactions relating to financing provided to buyout vehicles, securitisation of loans and purchases of performing loans and UTPs. Hence the big difference in relation to figures provided by BeBeez Private Data, which instead also tracks those markets. Thus, as shown in the BeBeez Private Debt Report 8 Months 2023 (available to BeBeez Interrnational Premium subscribers), private debt investments totalled EUR 20 billion compared to EUR 13.4 billion in the first 8 months of 2022 (see here the BeBeez Private Debt Report 8 Months 2022), while the whole 2022 year closed with EUR 27 billion in investments (see here BeBeez’s Report on Private Debt 2022), not too far below the levels of 2021, when a record of EUR 29.6 billion was reached (see here BeBeez’s Report on Private Debt and Direct Lending 2021). In particular, there has been a collapse in the value of minibond issues, i.e. of bonds for amounts of up to 50 million: in fact, in the eight months of 2023 only 57 issues were mapped out for a total of just over 201 million euro, including securities securitised within basket bonds, while in the whole of 2022 there had been 210 issues for a total value of just under 1.6 billion, much higher than the figure for 2021, which had been 1.105 billion. But certainly the emerging trend in recent months has been the great return of securitisations of loans to SMEs already disbursed or to be disbursed by commercial banks, which in some cases have structured the transaction through fintech platforms.
Going back to AIFI-CDP-Deloitte data and thus to the activity of private debt funds alone, in terms of investments, domestic players accounted for 72% of the number of transactions, while 78% of the amount was invested by international players. 50% of the transactions were loans, 47% were bond subscriptions and the remaining 3% hybrid instruments. Of the amount invested, 55% concerned buy-out transactions (EUR 705m, -29% compared to H1 2022), transactions targeting the development of companies attracted EUR 505m (39% of the market, up 51%), while the remaining 6% went to debt refinancing.
As far as the characteristics of the instruments are concerned, their average duration, just under six years, is in line with previous periods, while an average increase in the interest rates applied is observed. Geographically, the leading region remains Lombardy, with 26% of the number of transactions, followed by Veneto with 16%. With regard to the activities of the target companies, in first place with 24% of investments is the industrial goods and services sector, followed by the food sector with 22%. In terms of the size of the target companies, 53% of the investments concerned companies with fewer than 250 employees.
In terms of inflows, however, there was a sharp drop to EUR 316 million from EUR 410 million in the first half of 2022, a year that ended with total inflows of EUR 988 million from EUR 879 million in 2021, the highest figure ever recorded.
The first source were public sector and funds of institutional funds (63%), followed by banks (12%) and pension funds and provident funds (10%). Looking at the geographical origin, the domestic component accounted for 82% of total funding.
“Even in the private debt market, the results of the first half of the year show a slowdown in activity, in line with what we have seen in the private equity segment,” Innocenzo Cipolletta, chairman of AIFI, said and added: “In particular, there are too few resources allocated to the development of industrial projects of mid-market companies.
Finally, on the European side, Deloitte has calculated that from the end of 2012 to the end of June 2023, 4543 private debt investment deals were closed, of which 1539 in the UK, 1074 in France, 595 in Germany and another 1355 in the rest of Europe. As Andrea Azzolini, director of Deloitte Corporate Finance Debt Advisory, said (see the presentation here), underlining that, out of the total 256 deals mapped in the first half of 2023, 188 concerned the United Kingdom and that 70% of the total deals were aimed at financing m&a operations, mainly in support of business combinations, involving private equity operators (in fact, out of 600 deals mapped in the 12 months between June 2022 and June 2023 deals only 75 did not involve sponsored private equity funds). As for financing structure, unitranche remains the most common: 58% of cases in the UK and 48% of cases in the rest of Europe. While with respect to waterfall, the most common type of debt (83%) remains first lien (senior, unitranche or stretched senior).
