Chart of the Week

Higher leverage and weaker structures for leveraged loans is expected to result in worse than historic recoveries.

The share of highly leveraged midcap deals sold to institutional investors is at levels well beyond those seen during the frothy 2006-07 period.

Debt to ebitda has risen steadily for institutional middle market term loans, but yields are up as well.

Over the past three years, the average middle market LBO has generally remained range-bound, between $150-200 million.

All-in spreads favored middle market loans over large caps by 117 bps in September (up from 97 bps in August), while Libor remained flat.

An examination of all-market spreads show that unitranches to be higher than first/second lien, but the differential is shrinking.

New issue first and second lien spreads are on the rise, though the differential is shrinking.

In a William Blair survey, 63% of lenders indicated they would consider cov-lite or cov-loose structures for issuers below $50 million in ebitda.

According to Proskauer Rose, the vast majority of its private credit clients are employing non-bifurcated unitranche structures.

The illiquidity premium earned by middle market loans over broadly syndicated ones has generally tightened, now at less than 70 bps, while all-in spreads have risen.