Last week we punctured the myth that the influx of new private debt funds is creating excess demand for the level of deal supply of middle market senior loans [link]. We now turn our attention to credit quality. How will this year fare for credit investors relative to years past, and expectations? First, let’s separate…
Last week we ventured some thoughts on where this year would take us on middle market deal terms – pricing, leverage, structures, and covenants [link]. This week we examine the supply and demand technicals we expect will drive those terms. First, let’s dispel the persistent myth of too much cash chasing too few deals. Last…
If we learned one thing in 2016, it was that predictions of many sorts went awry. From national departures from economic unions, to presidential elections, to World Series champions, the unlikely became reality. With that in mind, we will offer in this series some thoughts on what’s to come this year in middle market lending,…
2016 was the Chinese Year of the Monkey. We’re not sure what this meant, or how it applied to the middle market, but in looking at how loans spreads behaved throughout the year, there might have been some relationship. For one thing, all-in spreads swung around wildly month to month. February, according to LPC, was…
“How’s your pipeline?” we asked the head of one of the leading middle market arrangers in December. He shook his head. “The quality-adjusted deal flow is down.” That distinction resonated with a number of our middle market brethren. Complaints centered around ebitda adjustments, over-liberal debt allowance baskets, and covenant-lite (or covenant-wide) structures. “High leverage per…
Along with the sense that mid-cap lenders can now more than hold their own against the largest investment banks in terms of deal size has come a predictable question: With all the lending capacity that’s now available in the middle market, isn’t there too much cash chasing too few deals? A long-time middle market practitioner…
The notion that the middle market has reached a level of maturity was supported by a plethora of evidence this past year. For one thing, arrangers showed astonishing underwriting capacity by taking on a number of large-cap sponsored buyouts. Probably the most precedent-setting was Qlik Technologies. At just over $1 billion, this Ares-led unitranche represented a…
For those of us who have made the middle market our livelihood for a while, last week’s Wells Fargo 2016 Middle Market Opportunities Forum was an extraordinary event. To see the likes of Steve Schwartzman, Lloyd Blankfein, Leon Black, and (in a lunch keynote) Michael Milken, at a conference dedicated to the virtues of private…
Among the unlikelier events of this post-election season – other than the consideration of former World Wrestling Entertainment executive, Linda McMahon, to be head of the Small Business Administration – has been the confidence with which institutional investors have rotated into leveraged credit. This despite the uncertainty surrounding the future of all sorts of policy…
At this writing it’s only been three weeks since the November 8 “tectonic shift” – as veteran financier Henry Kaufman dubbed the US election results. And while this Brexit-like outcome has injected a high degree of uncertainty into capital markets globally, there are potential positives emerging. In particular, we are encouraged by possible tailwinds for…