UK & Ireland Autumn Update

• Across the UK and Ireland, we’ve provided £1.6bn⁽¹⁾ of funding YTD reflecting our relationship focus, patient approach to investing, and ability to underwrite through economic uncertainty.
• 75% of lending on a bilateral basis and, in line with historical trends, split roughly 50:50 between portfolio borrowers and new names.
• In the lower mid-market, we have continued appetite to fund across the capital structure across senior debt, subordinated debt and minority equity to support both non-sponsored and sponsored transactions.

Key USPP themes

• Publics using Privates - as issuance and price discovery in public markets became increasingly challenging, the private market stepped into the gap, with Pricoa able to underwrite benchmark issue sizes.
• Pricoa Shelf gives strong optionality - we have provided over £600m in Shelf facilities – in times of uncertainty, corporates have increasingly valued enhanced optionality and quick access to long term capital.
• Tight coupon ranges across tenor - relatively benign spread curve driving attractive all-in coupons on longer dated capital.
• Euro pick up - Euro coupons remain 100-150bp inside comparative GBP pricing.
• Fixed vs. Floating - the modest delta between floating and fixed spreads currently attractive in context of market uncertainty and refinancing risk.

Sample 2022 Transactions

Rate Environment

Fed raised rates another 75bp last week in response to inflation, tight labour market and resilient consumer demand. As expected, BofE followed suit with a 75bp step up to 3% which had been priced in by a market which continues to see a peak in rates in mid-to-late 2023.

While tone on both sides suggests more modest future increments, the Fed communicated a slightly more optimistic view on the economy, while the BofE pointed towards a recession through 2023 in both published scenarios with the resilience of inflation and wage growth likely determining factors.

The market reaction has been muted given announcement followed expectations; while the magnitude of future uplift is debated, the directional trend into 2023 at least seems more clear.

⁽¹⁾ Calculated using FX rate of 1.15 USD:GBP.