Mergers, consolidations, and regulation all share responsibility for the flight of leveraged loans to the non-bank sector.
The long-term durability of leveraged loans was demonstrated out of the last recession, as values climbed back to par.
Over time collateralized loan obligations have proven to be resilient through cycles and regulatory hurdles.
After a good run leading up to last year’s market volatility, virtually no names in the LCD LSTA Leveraged Loan Index are trading at or above par.
The premium between large cap and the middle market has shrunk to 50 bps, the tightest in a decade.
Direct lending has attracted over $275 billion in capital since 2014 across various strategies.
Amid significant price volatility that occupied liquid markets, middle market loan trading levels were relatively stable.
It’s early days, but the middle market pipeline is off to a slightly better start than 2018.
LPC’s analysis of private club deals showed almost 93% of middle market volume was senior or unitranche.
2018 saw another increase in sponsored M&A volume in the middle market; up 12% from 2017.