This week we continue our conversation with Michael J. Hall and Bill Dietz, managing partner at Yukon Capital Partners. Yukon provides mezzanine capital to middle market businesses with a focus on deals controlled by private equity sponsors. The firm was poised to wrap up its second mezzanine fund raise. Second of two parts – View part one

The Lead Left: Still, there are real competitive pressures.

Bill Dietz: Yes, thanks to the stability of the economy and business in general. Regardless of availability of capital, sponsors tend to seek higher leverage and cheaper financing. No question our competitors have an influence. We’re losing and walking away from more deals as a result.

Michael Hall: But as we’ve said, with eight deals in the new fund already, we’re like flies at a picnic at the moment.

TLL: Are all eight buyouts?

MH: Yes, with one add-on. As a data point, our average total closing leverage for Fund I was 3.8x. Fund II is slightly lower than that, so far. We’re ok having the same yield but lower leverage. Our sponsor/partners know it’s not the most prudent thing to always push leverage as far as it will go.

TLL: What size sponsors are you targeting?