Livingstone’s Debt Advisory Newsletter – Fall 2015

Favorable loan environment rolls on as marketplace evolves

Although loan volume has picked up in recent months, YTD volume is nearly 20% lower year-over-year thanks to a weak first quarter.

New-Issue Loan Volume

While the deal environment remains favorable, the actual volume of completed deals is relatively low, as refinancing loan volume is down substantially from this time last year, despite peak conditions.

Debt capital continues to be in abundant supply as we see new lenders and debt funds popping up seemingly on a weekly basis. Middle-market lenders are structuring and pricing deals similar to the broadly syndicated market, and competition is heating up across the entire capital structure. If anything in this market can be described as a “soft spot,” it is commercial banks’ appetites for sponsor-backed cash flow deals, which are being curbed by the leveraged lending guidelines established under the OCC.

All eyes on GE

Competitors rush to fill the void…

With roughly 15-20% market share in the lower middle market, GE Capital plays an outsized role in financing PE-backed deals. The impact from the sale of GE Antares to Canadian Pension Plan Investment Board (CPPIB) will play out over the coming weeks and months. We believe that CPPIB bought the GE Antares franchise with the intention of continuing the businesses as a market leader in structuring and syndicating sponsor-backed middle-market buyout deals. However, during the integration, we anticipate competitors to have some success displacing the former GE Antares group. As if this market was not competitive enough, we expect players such as Golub, NXT and Madison Capital to offer aggressive structures for the next six months to take advantage of the disruption in the market.

Middle Market Term Loan Yields (3 Year)

Good Time to Be an Issuer

With an influx of capital chasing fewer deals, it remains a good time to be an issuer, with increasingly favorable financing terms. Issuers are benefiting from lower pricing, larger hold sizes, and generally more competitive structures. Meanwhile, structures reserved for larger borrowers continue to trickle down to the middle market. The combination of muted deal volume, coupled with the increased supply of capital, have created a hyper competitive lending market. Lenders have returned to structuring and pricing deals similar to the broadly syndicated market.

  • Leverage levels continue to follow the uptick in the M&A values
  • Many of the capital structures today are closer to what we saw in the first half of 2014
  • ABL deals are often pricing below L+200 even for “storied” credits

In summary

Ultimately, this evolving marketplace makes it more important than ever to find the right capital partner. Livingstone’s reach throughout the middle market equips us with real time market information as we search for the right partner to fund your capital needs. Please see our recent transactions which highlight our expertise across multiple industries and capital structures.

We would welcome an opportunity to speak with you further about the marketplace and your potential debt capital needs.

Livingstone’s dedicated Debt Advisory team provides a broad range of fixed income services to domestic and international clients, including corporations and financial sponsors around the world. With an extensive global footprint, Livingstone has expertise and execution capabilities in a variety of products and cross-border situations. As an independent advisor, not affiliated with any financial lending institutions, Livingstone is uniquely positioned to objectively arrange the most borrower-friendly capital structures for clients. The firm specializes in a variety of security types (Senior Bank Debt, Junior Secured Debt, Mezzanine Debt, and Convertible Debt) to support leveraged buyouts, management buyouts, refinancing, and balance sheet recapitalizations.

Tom Lesch


Livingstone is an international mid-market M&A and debt advisory firm of 100 professionals closing 60 transactions around the world each year.

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