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At the recent Mergermarket Germany Forum, we interviewed Marcel Herter of Herter & Co.
The main focus of the interview was to discuss how funds are competing with the increasingly low bank loan prices, and how funds at the top can keep from being marginalized. The response was a solid “No, I generally don’t think so.” that these funds aren’t being marginalized by the banks. Despite the fact that “bank prices have gone down, and terms have gotten looser”, the funds are much more flexible in their ability to structure the loan.
Part of this comes down to covenants, as they become enforced and followed more and more. Funds are not beholden to these covenants, although some suggest that the funds should be. This allows them to have control over their loan structures in ways that banks can’t, keeping them competitive. However, if the covenants were to be applied to funds, they would have few ways to compete with the banks, and would become marginalized.