ARR Flips Looming

Date 2 April 2024

Type Investment Banking

The European ARR financing market has grown considerably over the past 5 years and appetite for ARR structures has increased (with top credits commanding up to 4x ARR leverage).

A number of European assets have either flipped or have covenant flips nearing. Debt funds have been closely monitoring KPIs, assessing whether sponsors have executed the growth strategy as planned and there is a reluctance to extend the ARR testing period for those assets not performing as expected.

In this scenario, one likely option is that the sponsor may have to inject capital to ‘right-size’ the balance sheet, however, there’s an opportunity to source a new partner with greater tolerance and support to the growth plan.

Alantra has extensive coverage of the ARR lender universe and we would be delighted to support your capital raise needs. Non-specialist technology lenders are more cautious with ARR structures given fundraising and economic dynamics so knowing the correct pockets of capital remain key.