Lender Survey: Compared to the historical average, loan recoveries will be: Many investors have a wish list for rolling back structural deterioration with, not surprising, bringing back covenants with clean historical EBITDA definition meaning capped add-backs and no inclusion of projected results or cost savings at the top of the list. Although a lower spread…
What is the most likely catalyst for derailment? 41% of the audience polled last Thursday during Thomson Reuters LPC’s Fifth Annual Middle Market Loans Conference pointed to competitive pressures leading to structural and yield deterioration as the most likely catalyst for change or derailment in the market. However, one third pointed to geopolitical risk, which…
Share institutional term loans yielding less than 5% drops to 53% in 2Q17 from 68% in 1Q17 Primary yields, while still at low levels, have inched up so far in April. The average primary yield assuming a three year term to repayment on first-lien institutional tranches is 5.03% so far in April, up from 4.61%…
CLO issuance is on track to meet or exceed market forecast in 2017 One third of loan arrangers, CLO arrangers and managers surveyed by Thomson Reuters LPC expect CLO issuance could reach or exceed $70bn this year. But challenges remain including a lack of new issue supply and complying with risk retention. Amidst the ongoing…
Cross border financings gain momentum as thin EMEA pricing attracts leveraged issuers
In a turn around from 2012-2013 market trends whereby European issuers tapped the US loan market in a bid to lock in thinner margins, a number of US leveraged issuers have turned to the European market early in 2017, to secure thinly priced deals. In contrast to the rising interest rate environment in the US, the European market is expected to keep interest rates low in the near term...
1Q17 M&A volume down 32% year over year as market waits on policy guidance out of Washington
M&A loan issuance declined dramatically year over year to log less than US$70Bn in 1Q17, down 32% compared to the year ago results (US$102Bn). This represented the lowest quarterly results since 1Q13. Although some of the market shortfall on a percentage basis should be qualified in that jumbo financings for Avago Technology and Kraton Polymers which were completed in 1Q16 were in fact structured in 2015, the market took a very real pause in 1Q17 as issuers waited on the new administration in Washington...
LBO purchase price multiples averaged 9.6 times in 1Q17
After averaging over 10 times for the past three years, the average purchase price multiple on LBO deals dropped to 9.6 times in 1Q17. A high concentration of smaller deals and a more diverse industry composition of LBOs in 1Q17 is a driver of multiples coming down so far this year. But lenders should not get accustomed to this trend. Lenders and sponsors confirm that lofty valuations continue to remain a major roadblock holding back a robust buyout environment this year...
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...
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...
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...