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UK structured finance advisory firm AgFe is joining the ever-growing list of companies looking to enter the senior lending space in Europe. AgFe, set up by former Morgan Stanley securitisation banker Paul Rolles, is understood to have started raising capital for its first £1 bn (EUR 1.2 bn) UK senior debt fund.

The vehicle will focus on providing senior debt at up to 70% loan-to-value and secured against UK prime and good secondary real estate. AgFe declined to comment.

According to new research from DTZ, Europe's debt funding gap has more than doubled to EUR 140 bn over the past year and is expected to represent nearly 85% of the EUR 167 bn global gross debt funding gap by 2014. With the scarcity of finance expected to worsen in the medium term, new participants are looking to enter the senior debt market in a bid to take advantage of attractive returns and growing market opportunities.

Like AgFe, most new alternative lenders are looking to provide shorter terms to complement the longer maturities generally offered by insurance companies.

'Traditionally insurance companies have restricted themselves to long-term loans of 15-20 years or more that match their long-dated liabilities, whereas those banks that are still willing or able to lend are only prepared to do so on short terms. This is a space that we feel comfortable filling,' said Ashley Goldblatt, head of commercial lending at Legal & General Investment Management. In May, the UK group said it had provided a £121 mln debt facility to London-listed student accommodation specialist Unite. The 10-year loan is the first real estate debt financing to be completed by Legal & General Investment Management’s commercial lending unit which was established in May 2011.

The full article appears in the June edition of ProeprtyEU Magazine. Click on the link below to subscribe.