A client of ours makes packaging components. Plants in Poland and Portugal, head office in the Midlands, turnover split three ways across sterling, zloty and euro. In 2023 their relationship bank declined to refinance the group. Too many jurisdictions, the credit committee said, too much work for a mid-market name. Last month the same bank led a £38 million facility for the same group. Nothing about the business changed much. What changed was the market.
The retreat of 2022 to 2024 was abrupt. Rates went up faster than anyone planned, two sizeable banks disappeared, and every balance sheet in Europe was told to shed risk-weighted assets. Cross-border lending was the first line item to go. It costs more to underwrite, the legal bills are higher, and the files take longer to review. When a bank is asked to shrink, it keeps the loans it can monitor from its own window.
Two years later the arithmetic has flipped. Funding costs have eased, the deposit war has cooled, and banks need to write business because margins on new lending finally make sense again. Meanwhile the debt funds that filled the gap never left, and their pricing is the benchmark the banks now chase.
What brought the banks back
Three things. First, the cost of funding fell, which let lenders quote tighter without touching their return targets. Second, the funds proved that mid-market cross-border risk prices well: default rates stayed low, recoveries were decent, and the documentation held up in court. Third, bank shareholders got impatient. Loan books that only shrink are hard to justify to investors, and European banks have started competing for mandates again.
You can see it in the syndications. Three years ago a mid-market European borrower struggled to find one lender outside its home country. Today we routinely put four or five in a club, and the conversation is about pricing grid and covenant headroom, not whether the committee will look at it at all.
The terms have changed, though
The return of senior debt does not mean the return of 2021 terms. Lenders who learned that cross-border work is expensive to underwrite now charge for it differently. We see three consistent shifts across the mandates we run.
Security got heavier, not lighter. Share security over every operating company, guarantees flowing up and down the chain, and land registry mortgages wherever the assets sit. Lenders want the package perfected before drawdown, not promised afterwards.
Currency got disciplined. Where a group earns in euros and borrows in sterling, lenders expect either a match or a hedge, and they want to see the hedging policy in the diligence pack. The days of borrowing at home and hoping the exchange rate behaves are over.
Tickets got smaller per lender. Clubs are the norm, which means more consents, more intercreditor conversation and a longer path to signature. Well-run mandates budget for it.
Where it did not get easier
The recovery is uneven. Frontier market corridors remain ECA territory: the wrap or the DFI still has to be in the room. Long tenor project debt remains a fund and infrastructure market, not a bank one. And property lending has only revived where the story is logistics, data centres or prime residential in cities that work. Secondary office is still a conversation lenders leave early.
If your requirement sits in any of those categories, the answer is still yes, but the structure matters more than the shopping list of banks. Get the security, the currency story and the model right before the first meeting, because the lenders who came back are pickier guests than the ones who left.
The window is open. It rewards the borrowers who arrive prepared, and it closes politely for those who think a term sheet is a formality.