The 2021 record run

The financing market in late 2021 is about as good as it gets for a borrower. After the Covid trough, alternative-lender deal flow has rebounded to 578 on a trailing-twelve-month basis, European unitranche volumes have hit a quarterly high, and the buyout share of private-debt activity is holding above 70%. Capital is cheap, abundant and competing for deals. That is the signal. A hot market is the moment to fix the terms that matter when it turns.

This is the desk’s periodic stock-take, written from the data the major houses have published and re-expressed in our own terms. The reading is unambiguous: by every public measure, the supply of debt capital snapped back through 2021 to records. The market is plainly hot. The useful question for a borrower is what to do with it while you have it.

How far did deal flow actually rebound?

Start with the broadest gauge. Deloitte’s tracker counts European alternative-lender deals on a rolling twelve-month basis, and the four editions spanning the pandemic tell a clean story. The count fell from 484 in early 2020 to a trough of 385 by the spring of 2021 as Covid froze dealmaking, then rebounded to 578 by the autumn. That is not a gentle recovery; it is a snap back through the prior level to a new high in the space of a year.

The shape matters more than any single figure. A V is the signature of pent- up demand meeting ample capital: deals that were paused in 2020 came back at once, and the lenders had the dry powder to fund them. For a borrower, the practical reading is that competition among lenders is at a cyclical peak. That is when a process extracts the most.

Where was the heat most concentrated?

In unitranche. The GCA Altium MidCapMonitor, the most-cited public count of European mid-cap unitranche activity, recorded 135 transactions in the third quarter of 2021, a sharp acceleration on the prior quarters. Set against a full-year 2020 total of 260, the first three quarters of 2021 had already booked 336 deals. The single-lender, senior-plus-junior structure that barely existed a decade ago is now the default tool for the mid-market sponsor deal.

And the activity stayed overwhelmingly sponsor-led. Across the same four Deloitte editions, the share of alternative-lender deals funding a buyout rose from 64% to 71% and held there. Private-equity demand was the engine of the rebound, and the direct-lending funds were built to meet it.

What should a borrower do with a market this hot?

The instinct in a cheap-money year is to chase the lowest margin and close quickly. That gets price, the one thing the market gives away most freely, and leaves the harder-won terms on the table. The items worth fighting for in a lender’s market are the ones that bind when conditions turn: covenant headroom, tenor, and the flexibility to fund a bolt-on or a capex programme without going back to ask.

The logic is plain in hindsight, but it has to be acted on in the moment. Margin is repriced at the next refinancing; a five-year tenor agreed today carries the company through whatever the next two years bring. Headroom negotiated when lenders are competing is headroom you keep when they are not. A borrower who treats a hot market only as a chance to save a few basis points has used the smallest part of its leverage.

The desk’s standing advice does not change with the weather, but the weather changes how easy it is to act on. Run a competitive process across the whole field of lenders. Press for structure, not just price. And use a strong market to refinance and reset terms from a position of strength, rather than waiting for a maturity to force the conversation in a market that may be colder. 2021 is the easy version of that argument. The hard version arrives when the cycle does.