Borrower-Friendly Environment Reaches New Heights

Building on trends that gained momentum throughout the first half of the year, the third quarter saw continued strong market dynamics that led to favorable pricing, leverage, and terms for middle-market borrowers.

Friday, October 20, 2017

Leveraged finance markets remained highly borrower-friendly in the third quarter. Sixty percent of respondents to the William Blair Leveraged Lender Survey indicated that they provided higher leverage and looser terms during the quarter, while 57% reported lower pricing. A more telling sign of the state of the lending environment may be that not a single lender surveyed reported tightening terms, and only one lender reported increasing pricing during the third quarter. In addition, the William Blair Leveraged Lending Index reached its most borrower-friendly level since the metric was instituted in 2014; several other key metrics included in the survey also reached record levels. 

The positive market conditions were driven by several factors, notably the nearly $30 billion of increased capital flows targeting middle-market credit so far in 2017. These inflows came via fundraising activity for new and existing credit funds and middle-market CLO issuances. The need to deploy this newfound capital is causing more deals to be executed on a sole lender basis versus the historical norm of "clubbing up" a group of two or three lenders. This is causing an already-competitive market to become even more so and driving improved terms for borrowers.

Highlights of this quarter’s Leveraged Finance report include:

  • Competition drives superior terms
  • Middle-market high-yield issuances: significant inflows drive strong demand
  • Portability enters the middle market
  • Highlights from William Blair's Quarterly Leveraged Lender Survey

William Blair Leveraged Lending Index Continues Record Climb



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