For leveraged lending bubble busters, their canaries in the capital coal mine are leveraged statistics. Are we past 2007’s high-water mark?
To be sure, we’re hearing our share of scary stories. Like the 6.8x all-senior, covenant-lite, LBO financing for the less-than-$50 million-ebitda-issuer. And while these outliers are bound to excite the Chicken Little contingent, the overall data are less alarming.
As our Chart of the Week depicts, the share of 7x or higher LBOs over the past couple years comes nowhere near the levels breached in 2007. On average, S&P LCD says total debt to ebitda back then for highly leveraged transactions – so-called HLTs – was 4.9 times. Compare that to 5.0 times measured at 2Q 2014.