Lender Lens

Nicolas Nedelec, Eurazeo

Welcome to the first of our series profiling leaders in the Lender community.

With private credit playing an increasingly important role in the financial system, we wanted to find out how lenders are navigating the evolving landscape and how they assess the market in the coming years.

What is your house investment strategy? 

Eurazeo’s direct lending strategy is focused on the European mid-market, with the majority being senior secured loans. We lend to market leaders with strong growth fundamentals and backed by private equity sponsors, with conservative leverage, 100% covenanted documentation and board observer seats.

How do you differentiate in a competitive landscape?

In an increasingly competitive private debt market, we have maintained our focus on the mid-market segment, which we believe offers the best opportunity set in Europe right now due to the fragmented nature of the market and the ability to act as sole lender.

We only lend to companies with private equity backing, which offers our investors a stable return profile – indeed, since 2009 the direct lending strategy has invested c. €7.5bn into over 200 companies across Europe. Working closely with private equity sponsors also provides the opportunity for significant buy-and-build activity.

Finally, we have built a truly pan-European team, with teams on the ground in five major European geographies, including recent expansion into growing private debt markets Italy and the Benelux which, when combined with the considerable strength of Eurazeo’s overall European platform, gives us excellent origination and execution capabilities.  

What is your outlook on the private credit market over the next 1-3 years?

We have a positive outlook for the private credit market in the coming years, particularly in the mid-market segment.

We expect to see the continued retrenchment of the banks from lending in this sector, with direct lending funds stepping in to support companies that are the driving force of the European economy.

There is also likely to be continued acceleration in the European M&A market which, despite slowing slightly due to macro-economic and geopolitical factors, has remained robust. This will result in the need for increased LBO financing across Europe.

On the fundraising side, we also anticipate a broadening of the investor pool to include an increasing number of retail and HNWI investors, with fund structures evolving to allow improved access to the private debt asset class.

How is your team organised?

The Eurazeo Private Debt team is divided by country and/or region. There are private debt professionals on the ground in France, Germany, Spain, Italy, Benelux and the United Kingdom, with the UK team also serving the Nordics. 

What drew you to private credit? 

When I entered the private credit market 15 years ago it was still a very niche market and direct lending was essentially junior debt in very specific situations. This meant we had the opportunity to develop a whole new market and expand this offering into new territories across Europe, while also bringing the product to new investors across the globe.

We have also been at the forefront of developing new structures, products and funds, from levered to evergreen vehicles, as well as a retail offering, which has been extremely exciting. 

---