Commentary

How Big is the Middle Market? (First of a Series)

As great mysteries of life go, it’s not quite in the same category as what’s the universe made of, how does gravity work, or what ever happened to tan M&Ms. But for those who make it our career home, one of the most often-asked and vexing questions over the years has been, how big is

Refi Madness

If sheer volume means anything, total syndicated loan activity in the US for the first half of the year was singular. According to Thomson Reuters LPC, more than $1.2 trillion of paper – both investment and non-investment grade – was distributed through June 30. That was a bigger number than any other half-year on record. Digging

Fall Risk

It was probably mission impossible, but we gamely tried this week to complete a personal Top Ten list. This one is called “Top Ten Best Things About Rupturing Your Quadriceps Tendon in Church on Father’s Day.” #10 came quickly. “The minister was right there to deliver last rites.” #9 was relatively easy: “A brand-new walker

The 80/20 Rule of Private Credit

“Capital is destiny.” We’re not sure this pronouncement will make it into the next edition of Bartlett’s Familiar Quotations, but the notion sprung to mind as we recently addressed a top business school class. Topic? How private equity sponsors finance leveraged buyouts. To show students how debt markets work, we discussed how issuers benefit when

The Case for Covenants (Last of a Series)

“When things are good, people don’t pay attention to covenants, but when things go sour, covenants are their only line of protection.” So said one head of credit research of a large asset manager in a recent Bloomberg article. He was referring to bond covenants, but the lesson applies equally to loans. And things have

The Case for Covenants (Part Four)

It’s not surprising so much fuss has been made about the proliferation of cov-lite structures in the leveraged loan market. After all, what was the exception even among larger issuers has become the rule (see our Chart of the Week). Indeed this trend has been growing since 2013 when almost 60% of loan volume lacked

The Case for Covenants (Part Three)

At a recent debt conference we did what most of our direct lending colleagues are doing these days: complain. Speaking with one long-time practitioner, we mentioned a middle market transaction which was both cov-lite and ebitda adjustment-heavy. “Yeah, it’s ridiculous,” he said. “But it’ll get done.” Therein lies the problem. As we discussed last week, loan

The Case for Covenants (Part Two)

An astute Lead Left reader appreciated the first part of our special series on covenants. He alerted us to a ironic development Friday in the high-yield bond market. According to Bloomberg, bondholders of the commodities trader, Noble Group, saw values drop below 50 cents on the dollar on a negative earnings surprise. Apparently the bonds

The Case for Covenants (Part One)

It’s a fact of life in leveraged lending that terms are market-driven. During periods of excess liquidity – when loan demand exceeds supply – structures become issuer-friendly. When investors pull back, for any reason, terms swing in favor of lenders. When concerns about China and commodities roiled markets in August 2015, the Dow dropped 2000

Two Way Street

“We can do this the easy way or the hard way.” “What’s the hard way?” “It’s harder. It’s harder than the easy way. That’s what I know.” This classic exchange between Benicio Del Toro and Alicia Silverstone in the otherwise forgettable 1997 comedy Excess Baggage came to mind as we followed recent developments in the