Trump and the Middle Market

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At this writing it’s only been three weeks since the November 8 “tectonic shift” – as veteran financier Henry Kaufman dubbed the US election results. And while this Brexit-like outcome has injected a high degree of uncertainty into capital markets globally, there are potential positives emerging.

In particular, we are encouraged by possible tailwinds for private credit and the middle market. Many of the dynamics we have seen over the years we expect will remain in place as the environment for middle market lending remains favorable. Keeping in mind that prognostication is a long way from policy, we’ve considered several issues where these sectors might benefit in the context of a Trump administration...

QUOTE OF THE WEEK

“People are now thinking the glass is half full.”
Jimmy Chang, chief investment strategist, Rockefeller & Co.

Chart of the Week: Industrial Strength

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Five sectors comprise 60% of all middle market institutional loans.

Lead Left Spotlight

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Mickey Levy

Chief Economist for US and Asia

Berenberg Capital Markets

"Corporate tax reform and some easing of burdensome regulations likely would boost business investment spending. "

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Tom Cassidy

Managing Director

US Bank

" Our PE clients are attracted to the commitment we have to build a deep relationship over the long term."

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Tod Trabocco

Managing Director

Cambridge Associates LLC

"Whatever the numbers tell you, anecdotal evidence suggests that many direct lenders are overwhelmed with opportunities to prudently invest their capital."

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Steven Miller

CEO

Fulcrum Financial Data

"The market has turned 180 degrees since January. It shows how dynamic the loan market has become."

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Fran Beyers

Senior Market Analyst

Thomson Reuters LPC

"The smaller the deal, the harder it is to get terms."

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Theodore L. Koenig

President & CEO

Monroe Capital

""Most financial firms don't fail because of losses, they fail due to a lack of liquidity.""

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Features

Markit Recap – 11/28/2016

When a company announces that it is increasing the amount paid out to shareholders, it is not typically greeted with enthusiasm by credit investors. But Glencore is no ordinary company in the CDS world, and its announcement on December 1 wasn’t a standard chance in financial policy.

The Swiss firm said that it would be resuming dividend payments after a hiatus of more than a year. Back in September 2015, Glencore was under enormous pressure as it groaned under the weight of its high debt burden and struggled to cope with falling commodity prices. Five-year CDS spreads widened from 350bps to 850bps in the space of two weeks...

Leveraged Loan Insight & Analysis -11/28/2016

U.S. CLO portfolio trade prices climb

U.S. CLO portfolio trade prices have climbed from their early 2016 levels. The weighted average purchase was 98.92 in September, with the average sale price at 97.31. For the October trades collected so far, the weighted average purchase price is at 99.24, while selling prices average 97.67. Selling prices were more dispersed than purchase prices in 3Q16, as a higher share of portfolio sales were in the sub-98 and par-plus categories. CLOs sold loans at higher prices in the third quarter, with 50% of sales in the par-plus category, up from 37% in 2Q16...

The Pulse of Private Equity – 11/28/2016

How long will recent PE fund vintages keep returning at a fast clip?

One of the ongoing narratives presented by recent private equity fund returns data has been the recovery of vintages most impacted by the recession. As is evidenced by the chart above, the average distributions-to-paid-in multiple of 2007 and 2008 vintages have benefited considerably from the past few years’ selling frenzy, with a high-priced M&A ...

Private Debt Intelligence – 11/28/2016

Credit Strategies Asset Flows

Credit strategy hedge funds have recorded strong recent performance in 2016 YTD, making gains of 7.03% as of the end of October. Despite this, the strategy has struggled to attract investor capital, and suffered net outflows through the first two quarters of the year. This has led to a diminution of the strategy’s total assets under management (AUM) from the end of 2015, but net inflows in Q3 suggest that recent returns have been bolstering investor confidence
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Middle Market Deal Terms at a Glance

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capita-report-3q2016

State of the Capital Markets – Third Quarter 2016 Review and Fourth Quarter 2016 Outlook

Review of Current Market Conditions/ Analysis of Capital Markets Metrics Including Covenants, Pricing, and Leverage/ Review of Credit Quality/ Outlook for Fourth Quarter 2016

MM 2016

Special Report: 2016 – A Look Ahead in the Middle Market

Liquidity and Credit Appetite/ Middle Market Pricing and Leverage/ BDCs and Middle Market CLOs/ 2016 Predictions and Trends

Europe

Special Report: A Review of European Direct Lending

Banks vs. the Non-Banks/ Hurdles: Legal, Cultural, and Logistical/ Opportunities and Challenges/ A Path to ​Success/ Outlook for 2016…and Beyond