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Private Debt Intelligence - 3/27/2017

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First-Time Fund Managers

The environment for first-time private debt managers has begun to stabilise in recent years as the industry continues to mature. Fundraising has been consistently robust, performance has been strong, and investors are increasingly open to the prospect of committing to managers without a proven track record.

First-time private debt managers secured a record total in 2013 ($9.6bn), and in the years 2013-14 firms have raised over $23bn as the market continues to develop....

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Leveraged Loan Insight & Analysis - 3/20/2017

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Leverage on institutional middle market deals climbs on new money deals in 1Q17

Interest in middle market loans from large corporate investors tends to wax and wane based on market conditions, but currently investors are super receptive to these smaller credits given a supply demand imbalance in the leveraged loan market. As a result, leverage levels on institutional middle market deals are rising in 2017 across most deal purposes. Leveage on dividend recap deals peaked in 2013 at 5.3 times and was in decline through 2016 down to 4.3...

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Private Debt Intelligence - 3/20/2017

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Private Debt Fund Performance by Strategy

The private debt asset class has continued to satisfy institutional investors with 93% of those surveyed by Preqin at the end of 2016 stating that the performance of their private debt investments had either met or exceeded expectation. However, performance as measured by the median net IRR of funds varies notably across the three central private debt strategies: direct lending, mezzanine and distressed debt...

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The Pulse of Private Equity - 3/20/2017

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Recent PE vintages outpace public indices by a smaller margin

Private equity funds of vintages 2005 and prior exhibit significant outperformance of public indices, employing the Russell 3000 Index for public market equivalents calculations. Since then, however, no vintage has exceeded 8% over public indices’ performance. There are many factors behind this particular trend, not the least of which is the impact of the financial crisis, which prolonged holding periods as managers worked to proof impacted companies...

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Markit Recap – 3/13/2017

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Its mid-March, spring is upon on us and the credit markets are rallying. A rate hike by the US Federal Reserve was greeted positively by the market thanks to a dovish tone struck by Janet Yellen and her colleagues.

Technical factors also played their part. Option expiry occurs on the third Wednesday of the month, and position covering no doubt contributed to the tightening in the indices...

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Leveraged Loan Insight & Analysis - 3/13/2017

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What is the #1 factor to winning a deal in today’s environment?

When asked to select the #1 biggest driver in helping them win deals in this increasingly competitive environment, middle market banks were mixed. According to Thomson Reuters LPC's recent survey, one quarter said it comes down to the relationship, especially in the non-sponsored market where issuers rely heavily on that long term relationship. Perhaps more surprising, only 4% of non-banks ranked reputation and relationship as the number one factor. One quarter of banks chose willingness to stretch especially with regard to sponsors who are often asking for large corporate term sheets on smaller deals. One fifth of non-regulated lenders agreed...

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The Pulse of Private Equity - 3/13/2017

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Longer fundraising times indicate future for PE fund managers?

The time between closing of funds was by far the longest of the decade for private equity fund managers last year, whether you looked at the median or the mean. Especially in the wake of the significant uptick in 2015 the increase is striking, and adds considerable color to the current fundraising scene. Firstly, in light of fund sizes creeping upward by and large, the simple fact that it takes longer to raise a larger fund should be noted...

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Private Debt Intelligence - 3/13/2017

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Private Debt Industry Assets Approach $600bn

The private debt industry has continued to grow in recent years, and as of the end of H1 2016 reached a record $595bn in assets under management. This comprises $224bn in capital available to fund managers (‘dry powder’) and $371bn in unrealized investments held by private debt vehicles. Both of these components have increased over the first half of the year, up from $216bn and $339bn respectively as of the end of 2015...

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Markit Recap – 3/6/2017

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We noted last month that credit markets are still sensitive to political polls, despite doubts about their accuracy.

In particular, sovereign cds in Western Europe was responding to polls showing National Front leader Marine Le Pen surging ahead in the race to become France’s next president. Le Pen has stated that she is in favour of leaving the EU under the current framework, so it was no surprise to see France’s spreads widen when she took the lead in the polls.

But it was the behavior in the “ISDA basis” - the difference between sovereign CDS trading under 2014 and 2003 definitions - that caught our attention. Before Le Pen’s surge in popularity, the basis was stable at around 3bps. After her gains in the polls, the basis increased to 23bps in the final week of January...

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Leveraged Loan Insight & Analysis - 3/6/2017

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More middle market lenders expect to meet lending goals in 2017

Middle market lenders' outlook has changed a bit after coming off of a year where competition intensified and the majority of banks surveyed along with half of nonn-banks reported falling below lending goals. But, according to Thomson Reuters LPC's most recent survey, the share of those who expect to fall short again in 2017 is much lower. Only one third of banks and one fifth of non-banks don’t expect success, stating that continued competition and aggressive structures will hold them back...

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