09
Deferred payments and leverage
Percentage of purchase price deferred¹
Average deferral period¹
- Weighted by transaction value (purchase price plus unfunded) per respondent
- Deferrals of >60% significantly increased from 13% to 43% of deals, as buyers used deferrals to bridge bid-ask spreads and support a higher optical price.
- In 2022, 50% of secondary buyers surveyed used deferred payments, a 14 percentage point increase over 2021, as investors priced in longer hold periods due to closed capital market windows and M&A activity impacting distributions and potentially pushing down IRRs.
- There were a wide range of deferral periods in 2022 – of particular note was the more frequent use of deferrals beyond 18 months. Whereas there were no average deferral periods beyond 18 months in 2021, nearly 51% of deferrals extended this far in 2022. The longer deferral period was not only due to price dislocation, but vendor financing also replaced third-party debt for a portion of 2022 as loans became more expensive and difficult to secure.
Loan-to-value ratio¹
Type of leverage used²
- Average ratio based on implied levered transaction volume per buyer. No respondents who used leverage indicated using <10% or 50.1% to 50% of leverage on average
- Weighted by transaction value (purchase price plus unfunded) per respondent
- Less leverage was used in 2022 with a 14% drop in the percentage of buyers financing their secondary purchases. However, those investors that could secure debt did so more aggressively than last year with 49% of loans indicated to have a Loan To Value ("LTV") ratio of great than 30% compared to 35% of loans in 2021.
- There was a significant shift to non-recourse borrowing with 70% of transactions financed through SPV debt in 2022 versus 43% in 2021. Structural limitations within capital call facilities for buyers that were almost fully committed may have also contributed to the increased use of non-recourse debt.
Percentage of purchase price deferred¹
Average deferral period¹
- Weighted by transaction value (purchase price plus unfunded) per respondent
- Deferrals of >60% significantly increased from 13% to 43% of deals, as buyers used deferrals to bridge bid-ask spreads and support a higher optical price.
- In 2022, 50% of secondary buyers surveyed used deferred payments, a 14 percentage point increase over 2021, as investors priced in longer hold periods due to closed capital market windows and M&A activity impacting distributions and potentially pushing down IRRs.
- There were a wide range of deferral periods in 2022 – of particular note was the more frequent use of deferrals beyond 18 months. Whereas there were no average deferral periods beyond 18 months in 2021, nearly 51% of deferrals extended this far in 2022. The longer deferral period was not only due to price dislocation, but vendor financing also replaced third-party debt for a portion of 2022 as loans became more expensive and difficult to secure.
Loan-to-value ratio¹
Type of leverage used²
- Average ratio based on implied levered transaction volume per buyer. No respondents who used leverage indicated using <10% or 50.1% to 50% of leverage on average
- Weighted by transaction value (purchase price plus unfunded) per respondent
- Less leverage was used in 2022 with a 14% drop in the percentage of buyers financing their secondary purchases. However, those investors that could secure debt did so more aggressively than last year with 49% of loans indicated to have a Loan To Value ("LTV") ratio of great than 30% compared to 35% of loans in 2021.
- There was a significant shift to non-recourse borrowing with 70% of transactions financed through SPV debt in 2022 versus 43% in 2021. Structural limitations within capital call facilities for buyers that were almost fully committed may have also contributed to the increased use of non-recourse debt.
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