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Global private debt market means good things for local investors

by , 28 January 2013

Since the start of the financial crisis, which forced banks to shrink their balance sheets, there've been predictions of the development of a private debt market to plug the financing gap for the private equity industry. Financial advisors are now saying that UK investors would benefit from a private debt market and that private debt is reaching its peak in India. But what does this mean for investors in Africa?
“The model was there at the start of the private equity and hedge fund markets but isn’t currently there for the private debt market,” said James Newsome, managing partner at specialist private debt advisory firm Avebury Capital Partners, in an article by Financial news.
 
This situation is expected to change. As the debt offered by alternative finance houses is likely to be more expensive than from a bank, competition for deals has reduced spreads, explains Fenton Burgin, a partner at financial advisory firm Deloitte.
 
In many cases, the advantages of private debt will be enough to tempt buyout firms to use new lenders.
 
Many debt managers also offer debt across the capital structure.
 
But private debt has reached its peak in India, according to an article by the Calcutta Telegraph.
 
It notes that in private placement of debts, firms issue bonds to institutional investors to raise capital.
 
But what does this rise in international private debt mean for the South African investor market?
South Africa can expect a mixed bag for 2013, according to Tendani Mantshimuli, a consumer economist at Liberty, in an article on MoneyWeb.
 
While all eyes are on Europe, the impact on our economy and investor market is much greater.
 
In its medium-term policy statement, government committed to continue with its infrastructure programme. This is good news because government and public corporations have picked up the slack as the private sector scaled down on investment expenditure, says Mantshimuli.
 
Rates are likely to remain unchanged throughout 2013. This means that the cost of servicing debt will remain at low levels, which should still continue to support highly indebted consumers to work down their debt levels. “The model was there at the start of the private equity and hedge fund markets but isn’t currently there for the private debt market,” said James Newsome, managing partner at specialist private debt advisory firm Avebury Capital Partners, in an article by Financial news.
 
This situation is expected to change. As the debt offered by alternative finance houses is likely to be more expensive than from a bank, competition for deals has reduced spreads, explains Fenton Burgin, a partner at financial advisory firm Deloitte.
 
In many cases, the advantages of private debt will be enough to tempt buyout firms to use new lenders.
 
Many debt managers also offer debt across the capital structure.
 
But private debt has reached its peak in India, according to an article by the Calcutta Telegraph.
 
It notes that in private placement of debts, firms issue bonds to institutional investors to raise capital.
 
But what does this rise in international private debt mean for the South African investor market?
South Africa can expect a mixed bag for 2013, according to Tendani Mantshimuli, a consumer economist at Liberty, in an article on MoneyWeb.
 
While all eyes are on Europe, the impact on our economy and investor market is much greater.
 
In its medium-term policy statement, government committed to continue with its infrastructure programme. This is good news because government and public corporations have picked up the slack as the private sector scaled down on investment expenditure, says Mantshimuli.
 
Rates are likely to remain unchanged throughout 2013. This means that the cost of servicing debt will remain at low levels, which should still continue to support highly indebted consumers to work down their debt levels. 


Global private debt market means good things for local investors
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