“We’re waiting to see what happens.”
For many credit investors, and to some extent investors of all stripes, this oft-heard remark captures well the market’s view of 2016 as we enter its second month.
In the world of broadly syndicated loans, arrangers are like auto mechanics working in a dark garage. Operating by feel rather than sight, the sell-side is struggling with what wrench to use and how much torque to apply to meet buyer demand.
For add-ons to good credits (e.g. Central Security), it’s a quick tune-up. For more complex financings (e.g. Staples), it’s more like a new transmission. This cautionary tone makes visibility on deal pricing and structure a challenge.
Middle market players are less anxious, but the picture is no less clear. Arrangers report a “slow pipeline” and “quiet on the deal front” so far this year. 2016 has started off looking less like an episode of Top Gear and more like Overhaulin‘.