Middle Market Leveraged Finance - Current Market Conditions March 2021

Published on: 03/12/2021

Capstone Headwaters’ Debt Advisory Group has released its March 2021 Middle Market Leveraged Finance Report, with timely insight on the volume, pricing, and leverage statistics of today’s Credit markets.

While deal volume was depressed through much of 2020, lending activity returned in Q4 due to a strong push from sponsor leveraged buyouts (LBOs), add-ons at attractive multiples, and recapitalizations initiated during the pandemic. The market is increasingly returning to more traditional dynamics with broad auctions and new platform activity leading the charge. At the start of 2021, lending volume has greatly accelerated as lenders have rushed to meet aggressive loan origination goals.

Available for download below, the report discusses market statistics and observations including:  

  • While middle market loan issuance saw a modest recovery in Q3, lending volume greatly accelerated throughout Q4 and into 2021 as lenders rushed to meet aggressive loan origination goals.
  • LIBOR (London Inter-bank Offered Rate) spreads have continued to tighten in the marketplace driven by a supply/demand imbalance (more debt capital available than good deals to invest in).
  • Market feedback indicates leverage levels for new loans have increased 0.25x-0.50x from last summer with more highly sought-after borrowers closer to or matching pre-COVID levels.
  • After rising for months during mid/late 2020, default rates have seemed to peak.

Capstone’s Debt Advisory Group maintains close relationships with most every institutional lender active in the middle market and is available to help clients secure favorably priced and structured debt capital for their businesses. Contact Capstone’s Head of Debt Advisory Services Kent Brown for more information.

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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