Despite their reputation as riskier loans, dividends to sponsors have a 20-year history of lower defaults than the original buyout financings. Leveraged Loan Defaults by Purpose (1995-2014) Source: S&P Capital IQ

Seller friendly market conditions have spawned a revival of dividend recaps, though volume is still short of the comparable period two years ago.

While these data include all middle market loans, not just LBOs, the trend seems to confirm regulatory pressures are impacting leverage.  Source: S&P Capital IQ

Regulatory pressures have buoyed spreads since early 2014, with middle market at a consistent premium to large caps. Source: Thomson Reuters LPC

Not surprisingly, investors’ views of where interest rates will go track investing decisions on floating rate instruments. Source: Wells Fargo, Desktop Q3 2015 CLO Outlook.

The share of leveraged loans held by banks was up slightly, thanks to more BB and term loan A issuance this year.

A combination of corporates flush with cash and the pressure of high purchase price multiples has created tougher conditions for private equity buyers.  

Expectations in recent months of higher rates have caused volatility in options markets to diverge between equities and bond yields. Sources: Citi, Bloomberg, IIF via The Daily Shot

As Libor rates dropped post-crisis, Libor floors on leveraged loans have followed suit, although remaining in the 100 bps range. Source: Thomson Reuters LPC, quarterly middle market term loan yields  

After a long drought issuers are again accessing the loan market for re-pricings to lower borrowing costs.