2016 – A Look Ahead in the Middle Market (Fourth of a Series)

News reached us last week that a computer discovered the largest prime number known to exist. A “non-descript desktop” PC in Room 143 at the University of Central Missouri worked for 31 days before locating the 22 million digit numeral. The super calculator, known on campus as “No. 5,” was unavailable for comment.

Big numbers are also making news in the leveraged loan market. Thanks to regulatory headwinds and turmoil in the public markets, private equity sponsors are being challenged to round up sufficient debt capital for any financings over $500 million.

A case in point is KKR’s LBO of Mills Fleet Farm. In a normal market any deal of size for one of the world’s premier buyout shops would be catnip to institutional investors. But that was before the recent onset of volatility and leveraged lending guidance.

Bank capacity for broadly syndicated transactions has shrunk dramatically. According to press reports, the sponsor cobbled together its own financing package via relationship accounts and its own debt capital markets desk.