Middle Market Leverage Finance - Current Market Conditions Q4 2019

Published on: 02/10/2020

Capstone Headwaters’ Q4 Middle Market Leverage Finance report shares key market stats including Broadly Syndicated Loan volume, interest rate spreads, leverage multiples, and equity contributions.  Conditions in the middle market have become more conservative as lenders continue to shift their credit focus towards protecting portfolio credit quality as the end of the credit cycle approaches.  Other key observations include:

  • Leverage multiples generally declined during 2019 by 0.25x to 0.5x depending on the sector, structure, use of proceeds, and sponsorship involved.
  • Appetite among lenders for strong borrowers in favorable sectors remains quite high in our recent auctions, as lenders have become more discerning for less creditworthy issuers.
  • Higher valuations are driving greater levels of equity being contributed in LBOs, now about 50% of total sources (up from the 40%-45% range over the last decade), especially in non- (or lightly-) sponsored deals involving smaller credits and tougher sectors.

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Key Contacts

Kent Brown

Head of Debt Advisory Group

Brad Harrop

Vice President

Adam Morris

Vice President

Brian Schofield

Managing Director