PDF | Research |Week of Sep 19, 2022

Quote of the Week

“ This [inflation] report is a nightmare.

This puts a one-percent rate rise definitely on the table.”

– Diane Swonk, chief economist, KPMG.

 
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Private Capital in an Age of Scarcity





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Private Credit in an Age of Scarcity

(Second of a Series)

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Supply chain issues aren’t limited to bikes and baby formula. As the Fed withdraws liquidity from the banking system and investor cash exits public credit, it's more challenging to deliver capital to traditional buyouts and M&A.


In pivoting from a world of abundance to one of scarcity, credit markets are struggling to adjust. Direct lenders have built up record levels of dry powder over the past five years, but they have also been busy putting it to work. For several reasons, experienced managers are becoming more judicious about deploying the capacity they have left.


First, credit fund investors are more cautious about new allocations, thanks to public market volatility and concerns around a slowing economy...

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Chart of the Week

Powder Puffs

There’s an almost $400 billion gap between private equity and credit dry powder.

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Source: Preqin – North America data

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Stat of the Week

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Loan Stats at a Glance 

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PDI Picks

Why it’s time to revisit documentation

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Lenders have had a tough time at the negotiating table in a borrower-friendly market, but things may be changing...

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Leveraged Loan Insight & Analysis

Unitranche minimum

spread threshold shifts higher

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While volatility led to a significant increase in pricing in the broadly syndicated institutional loan market early in the year, it took longer to have an effect in the direct lending space. For unitranches, the average blended spread in 2Q22 was flat relative to 1Q22 at 596bp...

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Contact: Diana Diquez / Refinitiv LPC

The Pulse of Private Equity

More add-ons in the MM

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The ratio of add-ons in the middle market is increasing, according to PitchBook’s Q2 2022 US PE Middle Market Report. That’s been an evergreen trend for the past decade, but it appeared to go into overdrive in 2022. Add-ons now account for 73% of all middle market activity, up from 67.5% last year...

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Contact: Alex Lykken / PitchBook

Covenant Trends 

Percentage of Loans with an MFN Sunset

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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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Private Debt Intelligence

APAC private debt

fundraising steadies after record Q2

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After a record 2019, when APAC’s private debt fundraising hit $12.1bn, the following years saw a drop in comparison. However, the ship appears to be steadying, as the $6.7bn raised in 2022 so far matched the $6.7bn raised...

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Contact: Caroline Rolle / Preqin 

Debtwire Middle-Market

Leveraged loan & high yield bond

default rate creeps up from recent lows

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Source: Fitch Ratings, Debtwire Par

One area to watch as the Federal Reserve maneuvers a soft landing from inflation will be the credit health of leveraged borrowers in the face of prolonged economic pain caused by tightening monetary policy. August saw an uptick in loan defaults...

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Contact: Vincent Daigger / Debtwire 

September Update: Middle Market Deal Terms at a Glance

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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.