PDF | Research | Week of July 15 2024

The first half of 2024 kept us busy tracking volume in the newly energized BSL market. Remarkable, but not unexpected, was its ability with fresh capital to refinance higher-cost existing deals away from the direct lenders.

Left unexplained more fully was the driver of this activity. This special series explores how collateralized loan obligations (CLOs) are propelling both BSL and direct lending activity to record levels. To bring an expert’s perspective, we spoke with Kelli Marti, our head of CLO management.

We asked Kelli to give us a sense of the numbers. “Year-to-date volume of freshly minted CLO vehicles is almost $105 billion, according to PitchBook LCD,” Kelli told us. “That’s across 221 transactions – way ahead of last year’s $56 billion from 129 deals. Including resets and refinancings, a growing trend, that adds about $120 billion across 272 transactions.”

The prospect of lower interest rates has boosted new CLO issuance at a record pace.

Contact: Ryan Brown / PitchBook LCD

It’s an area of alternative assets that has retained its popularity with LPs despite the challenges experienced by fundraisers lately. 

Last year was notoriously tough on the fundraising trail for alternative asset classes but infrastructure debt managed to buck the trend, with affiliate title Infrastructure Investor’s Debt 30 ranking recording a $10 billion increase in total capital raised for 2023...

Over US$99.5bn of new US CLO issuance has been completed through the end of June 2024, an increase of over 77% compared to the same time last year and a 23% gain compared to the prior record half year total of US$80.7bn set in 1H21....

Contact: Maria Dikeos / LSEG

In Q1, the number of middle-market take-private transactions saw a notable increase. We believe this reflects the cheaper valuations of public companies with small market caps relative to large caps, as well as reduced market volatility...

Contact: Garrett Black / PitchBook

Contact: Eric Rosenthal / KBRA DLD

Middle Market & Private Credit

PMRs Stay Longer in ‘CCC’ Category

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PMR issuers within the ‘CCC’ category have a lower average annual upgrade rate, lower average annual default rate and a higher average annual stability rate than publicly rated peers. Different stakeholder dynamics within the direct lending segment play a role in the lower number of defaults within the PMR portfolio.

Contact: Brad Hamner / FitchRatings

Launched Volume

New-issue Yields

Weekly Fund Flows

Weekly fund flows source: Lipper

Contact: Robert Polenberg / LevFin Insights

Debtwire Middle-Market

The blue line in the chart is the current dividend yield of the *VanEck BDC Income ETF (currently at 10.7% as of 8 July, down 100bps from the highest level in last 12 months of 11.7% in October 2023) that tracks the overall performance of publicly traded business development companies (BDCs, are lenders to privately held middle-market businesses that tend to be below investment grade or not rated, with most lending comprising of senior secured loans)...

Contact: Suneet Chandvani/ Debtwire 

Private Debt Intelligence

Family office investors favor private debt 

Read more in Preqin’s Insights+ Research Note: Private wealth's path into US private debt

Family offices, which make up over a third of the private wealth entities, are showing a clear appetite for private debt strategies...

Contact: William Bennett-Lynch/ Preqin

Contact: Stefan Shaffer / SPP Capital Partners