Spot-lite on Cov-lite (Third of a Series)

The notion that covenant-lite loans are bestowed on only the best and brightest borrowers has been pretty banged up. Cov-lite and other leveraged lending terms are now hostages in the front-line battle middle market arrangers are waging for business.

Competition is no longer just among the midcap lender themselves. For companies in and around the $50 million ebitda mark, the larger investment banks have become increasingly frequent sources of capital. This is particularly true when sponsors seek to eke out the last 25 bps in pricing or the last quarter-turn of leverage.

For new buyouts in the larger middle market space, private equity buyers have at least two options. They can select an underwriter to distribute paper in the broadly syndicated market at the most issuer-favorable terms. That party will hold none of the paper itself. Or they can go the club route...



“We’re in this sweet spot. That’s been the case all year, and that’s still the case.”
– Lee Ferridge, head of North American macro strategy, State Street Global Markets.

Chart of the Week: Budding Lite

The volume of middle market cov-lite loans fell off last quarter from 2Q’s $6.3 billion; tranche size held steady at $210 million.

Lead Left Spotlight

Niels Bodenheim

Senior Director of Debt Research


"Private markets are certainly one of the fastest growing categories. Within that, private credit is the biggest contributors to that growth."

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Ilan Nissan

Senior Partner

Goodwin Procter

"Lenders are falling over themselves to provide aggressive terms."

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Stephen Boyko



"Even the direct lenders who are offering the most aggressive terms want covenants when they hold a good chunk of the deal."

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Jason Block & Fred Buffone

Partner and Chief Investment Officer | Principal

Freedom 3 Capital

"We want to create a capital structure that works for the business plan."

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Marc Daniel

Managing Director, Mergers & Acquisitions

SunTrust Robinson Humphrey

"LPs are committing new money to PE funds at the fastest pace since 2008."

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Ted Goldthorpe

Head of Credit

BC Partners

"For our sponsored transactions, we source them by the traditional approach. For non-sponsored deals we target certain industry sectors we know well."

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Markit Recap – 10/16/2017

Wind CDS orphaned? We noted last month that orphaned CDS seemed to be on the rise, with both EDP in Portugal and Italy’s Wind possibly losing their relationships with deliverable obligations. The picture was clear with EDP – bonds will be issued out of EDP Finance BV and this was reflected in the entity’s inclusion

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Leveraged Loan Insight & Analysis – 10/16/2017

Strong investor appetite supports institutional issuance but tougher credits command better terms Despite robust market technicals including two weeks of retail fund inflows and a steady CLO pipeline, institutional lenders are reconciling strong demand for assets with discipline around credit quality. Roughly $34Bn of institutional loan volume has come to market early in 4Q17 and

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The Pulse of Private Equity – 10/16/2017

Private Equity’s Amazon Problem Nordstrom, thought to be a prime buyout candidate, is now having trouble securing debt commitments for a would-be deal. It opted this week to wait until after the holiday season to assess any PE buyout, even with an investor waiting in the wings. Following the bankruptcy of Toys R Us, another

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Private Debt Intelligence – 10/16/2017

Private Debt Dry Powder Reaches New Record The capital available to be deployed by private debt fund managers has reached a new record in October 2017, peaking at $226bn. This is in part due to record fundraising in Q4 2016, followed by robust quarterly fundraising in 2017 so far – over the 12 months to

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Middle Market Deal Terms at a Glance

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Special Report: How Big is the Middle Market?

Beginning in July 2017 The Lead Left published a series of articles on the size of middle market. This report consolidates those articles.

State of the Capital Markets – Third Quarter 2017 Review and Fourth Quarter 2017 Outlook

Review of Current Market Conditions/ Analysis of Capital Markets Metrics/ Review of Credit Quality/ Outlook for Fourth Quarter 2017

Special Report: The Case for Covenants

Beginning in May 2017 The Lead Left published a series of articles on Covenants. This report consolidates those articles.