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, with a healthy awareness that anything can happen.

Let’s start with issues that concern many middle market debt investors about the year ahead: deal terms, supply/demand, credit quality, and exogenous factors.

Deal terms are the most visible consequences of market conditions. Obvious examples include pricing, leverage, structures, and covenants. All are interwoven, of course, but let’s examine each and see where trends may be headed.

Pricing – Because the middle market is a “closed” system, relative to the broadly syndicated market where investor cash comes and goes, spreads tend to be more stable. Also, as we’ve said many times, direct lenders are “buy-and-holders,” so there’s no secondary market to push prices – thus spreads – around.