Emerging Trends in Financing and Risk Management

Demand for green and sustainability-linked financing is expected to grow, benefiting companies with better borrowing terms and enhanced access to capital. Private credit and direct lending will gain prominence, offering flexible financing but requiring increased scrutiny. Asset-Based Lending (ABL) will rise, providing rapid capital access and improved liquidity management, particularly in volatile market conditions. M&A market revival and refinancing demand will drive issuance volumes, with significant debt maturing from 2025 to 2027, necessitating proactive strategies. Protective covenants will become more prevalent, enhancing investor confidence and risk management, with weaker credits facing tighter restrictions. Asset & Liability Management (ALM) exercises will rise in 2025, focusing on refinancing strategies and effective risk management.

Key Considerations in 2025

Rising Demand for Green and Sustainability-Linked Financing

Growing Importance of Private Credit and Direct Lending as Alternative Sources of Funding

Increase in Asset-Based Lending (ABL) as a Preferred Financing Option

M&A Market Revival and Refinancing Demand Drive Issuance

Increased Adoption of Protective Covenants

Documentation terms will increasingly emphasise protective covenants like J.Crew, Chewy, and Serta blockers. This trend will enhance investor confidence, driven by rising interest rates and the need for expanded protections and improved risk management strategies. While high-quality deals may still enjoy looser terms, weaker credits will face higher pricing and tighter restrictions, reinforcing the need for robust risk management.

Rise in Asset & Liability Management (ALM) Exercises

Trends and themes to act on

Embrace Sustainable Financing: Companies should integrate strong ESG practices to attract green and sustainability-linked financing, securing better borrowing terms and dedicated capital inflows, aligning with growing investor demands for responsible investment opportunities.
Explore Alternative Funding Sources: Businesses should explore private credit and direct lending as flexible financing options that can be tailored to specific needs. To maximise value and mitigate risks, ensure thorough scrutiny of borrower quality and deal structure.
Prepare for Refinancing Needs: Firms must develop proactive refinancing strategies to manage upcoming debt maturities from 2025 to 2027, maintaining stable capital structures and effectively mitigating potential liquidity challenges.