Even in normal times, private equity sponsors pay ruthless attention to cost structures of portfolio companies. Covid has raised to new levels the challenges buyers have managing supply chains. “Eighteen months ago, Covid was a top-line issue; now it’s mostly a cost issue,” one partner told us. “We can pass price increases along, but with […]
Before Covid the persistent view of private credit was too much capital chasing too few deals. Transaction inflation was resulting in tight spreads, high leverage and weak terms. When Covid hit this balance shifted dramatically in favor of the investor. Deal supply dried up, lenders retreated, and terms strengthed. But within weeks central bank liquidity […]
One of the more fascinating aspects of the past 18 months has been watching the divergent economic narratives between headlines and data. The Bureau of Labor Statistics reported a record high 10.9 million job openings in July. The three largest sectors comprising this increase were healthcare, finance, and food services. Yet there also less than […]
Last spring we were shopping for garage doors. Lumber prices had skyrocketed – almost to the price of gold. So we chose steel. As did everyone else. Wood is now cheaper. And we’re still waiting for our doors. The industry publication Supply Chain Management Review reported that 2021 is on a record pace for factory […]
“The unitranche was invented in response to broken capital markets, when banks were backing away. Today it’s thriving when markets are booming.” The size of these financings has also grown dramatically. How large could they get? We remember the same questions being asked about broadly syndicated loans in 2007. If the largest direct lenders collaborate, […]
According to Refinitiv LPC, US unitranche volume came to almost $22 billion last quarter – the highest level they’ve tracked historically. At the same time, one-stop risk/return dynamics have moved in favor of issuers. The average debt/ebitda is now at a record high 5.9x, with all-in Libor spreads hovering around 600 bps. As we told […]
In October 2015 we published a white paper: “The Unitranche – What it is, and Why it Matters.” In it we called the unitranche “one of the most innovative, and increasingly popular, financing tools in the middle market.” The following year Ares reached a milestone by leading, for Thoma Bravo’s Qlik Technologies, the first $1 […]
As we conclude our European private credit series, let’s review what we’ve learned: Europe suffered a similar Covid slump (and enjoyed a similar rebound) as the US. Deal volumes are at record highs. Europe retained the country-by-country distinctions they had pre-Covid. Pricing in the US and across the pond is close. Though European upfront fees […]
This week’s Chart of the Week highlights how US and European private debt fundraising came into Covid with a head of steam, slowed, and has now picked up. Our content partner, , recently published excellent commentary related to investors’ views of the “European opportunity.” One CIO said it started looking more attractive when US yields […]
We continue our conversation with Lincoln International’s European office. “US and Europe are competing markets,” Xenia Sarri told us. “The US was increasingly aggressive six years ago, but now terms are more favorable in Europe. There are no baskets around restricted payments. No excess cash flow sweeps, no amortization and tighter flex language. Are there […]