Issuers in leveraged lending today are divided into three categories: the haves, the have-nots, and the wish-they-hads.

As the 2019 loan calendar heads into its final six weeks of activity, the differences between the first two categories are becoming more pronounced.

In the broadly syndicated market, as we covered last week, the combination of triple-C anxiety among CLO managers and cash out-flow worries with retail funds have impelled a flight-to-quality. Better rated issuers in defensive sectors are the haves; challenging “story” credits are only getting done with investor-friendly tweaks.

Using the syndicated middle market, this trend is illustrated by our Chart of the Week. For the first time since 2015, flex-ups in midcap pricing reached $2.2 billion. By definition, a flex-up means the loan arranger expected the financing to clear the market at a lower spread (and other terms), and guessed wrong.