Since 2015 investors in the Leveraged Loan Index are being compensated less-well for risk.
While data for cov-lite bankruptcies are limited, post-crisis recoveries were below pre-crisis levels.
Data suggests that loan recoveries are both facility and structure dependant.
Higher leverage and weaker structures for leveraged loans is expected to result in worse than historic recoveries.
The share of highly leveraged midcap deals sold to institutional investors is at levels well beyond those seen during the frothy 2006-07 period.
Debt to ebitda has risen steadily for institutional middle market term loans, but yields are up as well.
Over the past three years, the average middle market LBO has generally remained range-bound, between $150-200 million.
All-in spreads favored middle market loans over large caps by 117 bps in September (up from 97 bps in August), while Libor remained flat.
An examination of all-market spreads show that unitranches to be higher than first/second lien, but the differential is shrinking.
New issue first and second lien spreads are on the rise, though the differential is shrinking.