Borrowers and Sponsors Cautiously Optimistic Despite Macroeconomic Challenges, Finds Antares Survey

CHICAGO--(BUSINESS WIRE)--Antares Capital (“Antares”), a leading alternative asset manager with $68+ billion in capital under management and administration, today released its inaugural Credit Market Outlook Survey, which found that a majority of respondents expect healthy organic revenue growth, less stress across their portfolios and a pick-up in M&A activity in the second half of 2024.

“Our survey indicates that while private equity sponsors and middle market borrowers – the growth engine of the U.S. economy – remain vigilant of ongoing macroeconomic challenges, their expectations for the latter half of the year suggest a credit market poised for growth,” said Timothy Lyne, CEO of Antares Capital. “The data aligns with what we’re seeing across the majority of our portfolio, one of the largest and most diverse in the industry. Borrowers, primarily across non-discretionary and highly defensive sectors, continue to exhibit strong fundamentals including year-over-year revenue and EBITDA growth albeit at a slower pace.”

Optimistic expectations for U.S. economy may drive growth

According to the survey, which gathered respondents from private equity sponsors and Antares borrowers from a diverse range of industries, a majority of borrowers anticipate a “soft landing” for the U.S. economy, with 78% expecting slow growth (0-2%) over the next 12 months, 12% expecting faster growth and only 10% expecting a recession.

This outlook for the economy coincides with healthy revenue and earnings growth expectations compared to 2023 – more than two thirds of borrowers (68%) expect “modest” or “strong” growth in revenue, while nearly three-quarters (74%) of borrowers expect healthy organic EBITDA growth. Additionally, most borrower respondents (52%) expect their net headcount to rise as compared to 2023.

Private equity sponsors anticipate increase in deal activity

The survey also found that a majority of private equity sponsors (58%) see pressures facing their portfolio companies as stable compared to 2023, with 21% seeing decreasing pressure. Additionally, most private equity sponsors have strong conviction they will buy a business during the second half of 2024, with almost 80% noting a 50%+ likelihood. Relatedly, close to half of private equity sponsors (49%) expect a modest to sharp rise in deployment of their investment dollars into LBOs in 2024 vs. 2023.

Private equity sponsors noted that the most attractive industries for new platforms include Industrial (29%), Business Services (18%) and Healthcare (17%). Further, as much as 86% of sponsors are exploring continuation funds as a liquidity solution, 38% are exploring NAV loans and 11% are considering selling GP stakes as a liquidity solution.

“With cautious optimism displayed by both borrowers and sponsors, we anticipate a positive impact on originations as M&A activity continues to pick up,” said Lyne. “We believe that Antares’ scale, experience and time-tested credit culture provide advantages that allow us to navigate through market cycles as we focus on delivering attractive risk-adjusted returns.”

To view the full report, click here.

About Antares

Founded in 1996, Antares has been a leader in private credit for nearly three decades. Today with more than $68 billion of capital under management and administration as of March 31, 2024, Antares is an experienced and cycle-tested alternative asset manager. With one of the most seasoned teams in the industry, Antares is focused on delivering attractive risk-adjusted returns for investors and creating long term-value for all of its partners. The firm maintains offices in Atlanta, Chicago, Los Angeles, New York, Toronto and London. Visit Antares at www.antares.com or follow the company on LinkedIn at http://www.linkedin.com/company/antares-capital-lp. Antares Capital is a subsidiary of Antares Holdings LP, (collectively, “Antares”). Antares Capital London Limited is an appointed representative of Langham Hall Fund Management LLP, an entity which is authorized and regulated by the Financial Conduct Authority of the UK.