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PDF | Research | Week of May 1, 2023

Quote of the Week

“There’s absolutely no evidence of a recession risk-premium [in the junk bond market].”

– Lotfi Karoui, chief credit strategist, Goldman Sachs.

 
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Private Market Valuation Myths Dispelled

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Three Myths of Private Market Valuations

(Last of Three Parts)

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We conclude our special series on private market valuation myths with:


Myth 3: Leveraged capital structures lead to conflicts of interest amongst private equity sponsors and lenders that can create negative outcomes and lower valuations.


We asked Ron Kahn, Lincoln International’s valuation chief, to help parse this issue.


“If you look at public company capital structures,” he told us, “they often have complicated financings across various layers of debt and equity. These capital providers don’t usually share investment priorities, so economic interests can go crossways if market sentiment changes...

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Chart of the Week

Technically Speaking

Lincoln’s database shows rising defaults – covenants, not payments – from a low base.

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Source: Lincoln Proprietary Database

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Stat of the Week

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Loan Stats at a Glance 

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Contact: Marina Lukatsky / S&P Global Market Intelligence

PDI Picks

Subordinated debt bucks fundraising trend

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The strategy appears to be claiming market share as fundraising shows signs of coming under pressure...

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Leveraged Loan Insight & Analysis

US institutional primary yields

widen to 10.26% in 2Q23TD

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After plummeting in March, activity has picked up in the institutional market. However, issuers are facing higher yields on average so far this quarter. After a huge jump in 3Q22, average yields were relatively flat in the last...

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Contact: Diana Diquez/ Refinitiv LPC

The Pulse of Private Equity

Corporate M&A multiples have eased

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Corporate M&A multiples have eased to decade lows, according to PitchBook’s Q1 2023 Global M&A Report. Last year’s multiple settled at 8.5x, down from 10x in 2021. A quarter into 2023, multiples continue to drop...

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Contact: Alex Lykken / PitchBook

Covenant Trends 

Distribution of Synergies & Cost Savings

EBITDA Addback Time Horizons

(for Actions Resulting in Addbacks)

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Contact: Steven Miller / Covenant Review

High-Yield Bond Statistics

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Weekly fund flows source: Lipper
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DL Deals: News & Analysis

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KBRA DLD tracks 214 deals

in 1Q23 across U.S., Europe

KBRA DLD tracked 214 direct lending deals in the first quarter across the U.S. and Europe. Even though Europe’s direct lending universe is much smaller than the U.S., the region’s count didn’t lag by much. Our tally drew 95 deals for Europe versus 119 in the U.S...

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Contact: Kelly Thompson/Rachel McGovern /Direct Lending Deals

Private Debt Intelligence

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Mezzanine debt fundraising

boosted by megafunds

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Mezzanine debt fundraising picked up momentum in the first quarter of 2023, accounting for 65% of total private debt raised in the period. Mezzanine funds raised $20.7bn in Q1 2023, boosted by the closes of...

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Contact: Valerie Kor / Preqin

Debtwire Middle-Market

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Source: VanEck BDC Income ETF and BofA Merrill Lynch US High Yield Effective Yield

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Contact: Suneet Chandvani / Debtwire 

Middle Market Deal Terms at a Glance

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Contact: Stefan Shaffer / SPP Capital Partners

Select Deals in the Market

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This publication is a service to our clients and friends. It is designed only to give general information on the market developments actually covered. It is not intended to be a comprehensive summary of recent developments or to suggest parameters for any prospective financing opportunity.