As with all great capital market innovations – price flex, CLOs, and second-lien term loans – the unitranche seems obvious in hindsight. Having one lender provide a senior secured tranche that mimics a combined senior and subordinated debt structure solves a number of borrower issues. Yet its development was hardly a foregone conclusion. A decade ago the…
With the passing of Yogi Berra, the position of sports legend/philosopher is now vacant. While no obvious candidates have stepped forward, we offer to nominate Cam Newton, star quarterback of the Carolina Panthers. Second-guessed on a play call by a reporter at a press conference last October, he replied with a shrug, “Hindsight is always…
In the classic 1962 film, “Lawrence of Arabia,” two British officers watch the unfolding chaos as Arab tribes vie for control of Damascus. Eager to keep events from spiraling out of control, the colonel pleads with his commanding officer, “We can’t just do nothing.” The general, savvy to the political reality, replies calmly, “Why not?…
Leveraged loans occupy a unique position in the credit asset class. Like high-yield bonds they boast an active secondary market, but unlike junk they reside at the top of the capital structure. Also, like high-yield, these loans are extended to non-investment grade issuers so enjoy higher returns than their investment grade cousins. But unlike bonds,…
According to Merriam-Webster, the word “volatility” comes from the Latin, volātilis, meaning flying. Any investor who has remotely been paying attention to market events over the past several weeks can appreciate that etymological derivation. Even this community grown accustomed to wild swings of value over the past seven years was taken aback by the gyrations…
With the unofficial end of summer almost upon us, we thought it would be appropriate to take a look at what’s in store for the loan markets in September. First, let’s examine total deal volume. Thomson Reuters LPC reports that year-to-date middle market LBO activity is on track relative to last year: $10.7 billion vs….
Leveraged lending guidelines have set six times total leverage as the limit above which a loan would likely be criticized by examiners. Less noted by the media, but of growing interest to market players, are the components of leverage metrics; specifically, how the numerator (debt) and the denominator (cash flow) are being massaged to put…
News last month that the New Horizons spacecraft zipped by the former planet Pluto at 36,373 mph, snapping pictures as it went, drew raves from the rocket science community. Our attention was taken by one ironic fact: the probe’s generator runs on plutonium. Rare elements were much on our mind as we’ve tracked the paucity…
Last week we covered dividend recapitalizations on sponsored leverage loans. Turns out the topic required more air time, based on the feedback we received from readers. One of the top investment bankers in the middle market reflected on the differences lenders perceive among recaps opportunities. “A primary consideration is the vintage of the fund for…
It’s that time of year again. We’re not referring to barbecues and Slip ‘N Slides, although both hot and liquid could be used to describe conditions in leveraged lending today. No, we mean it’s time to sit back and watch as dividend recaps come alive again. S&P Capital IQ’s Steve Miller had a great note…