October 20, 2014

Brief State of the Union on the Debt Market

The leveraged finance market (including high yield, pro rata, and institutional debt) is going strong after a record year in 2013, which raised nearly $950 billion.  The market has raised close to $590 billion in the first seven months of 2014, putting it on pace to exceed last year.  In the space that we cover, we are seeing total leverage ratios for cash flow deals with less than $7.5 million of EBITDA top off around 4.0x and a blended rate in the neighborhood of Libor + 9% – 10%.  Larger businesses with $10 – $20 million of EBITDA are dancing around 5.0x total debt to EBITDA while blended pricing is more favorable at around Libor + 6% – 8%.  There are many types of lenders out there and it is important for borrowers to shop around to make sure they find the best deal in terms of pricing and flexibility.