So far in this series we’ve covered the unique lending characteristics of European jurisdictions as well as the inherent advantages held by European banks. This week we look closer at the opportunities presented to non-bank direct lenders.

Selling high-yield bonds in Europe has generally been unchanged over the past five years. It’s still a public market with the same investment bank underwriters, trading dynamics, and investors. By contrast the landscape for loans has seen an influx of funds from global asset managers, investment firms, and private equity sponsors.

But as we’ve highlighted, banks still have the upper hand as arrangers of middle market senior debt. This is particularly true for private equity backed borrowers. The manager at one leading European fund put it this way: “As is increasingly true in the US, sponsors in Europe control every aspect of deal structure, who’s invited into the financing, even who trades the paper. If you’re a bad actor, it’s tough to break in.”

Another source agreed. “Forget about getting a decent allocation if you’re on somebody’s black list. You won’t even be allowed to trade in the secondary market.”