We’ve all seen the data showing that the first quarter middle-market leverage loan volume was much less than everyone expected. So why aren’t yields coming down on mid-market loans?

For the last 18 months, we’ve been extolling the virtues of unitranche debt. This structure has gained substantial popularity over the last few years as an ideal replacement for the cash flow senior debt that banks and CLOs no longer supplied as eagerly to the middle market following the 2008 credit crisis. With the ability [...]

The stock market has seen incredible volatility during the last several months, and, unfortunately, the overall trend has been downward. But does a decrease in equity values affect the valuations of illiquid debt securities? The answer is yes. And why do we even care? Because many middle market lending institutions like BDCs, hedge funds, credit [...]

It’s only August. We should all be out enjoying the hot summer weather. Yet winter may be coming early this year as we see signs of a freeze upon us. Of course, I’m not talking about the weather, but financings for middle market companies—particularly those thousands of companies that make up the back bone of [...]

Here we go again – the lenders are out in full force, aggressively marketing to borrowers and eager to deploy capital. It wasn’t that long ago when we dreamed that these days would return and now they are upon us. Interestingly, with the advent of unitranche debt and the increasing number of hedge funds and [...]

Boston-based private equity firm Audax Group completed its buy of the Elgin Equipment Group, an Illinois-based maker of material processing parts for coal, oil and gas applications. Specifics on the deal were not publicized. Lincoln International advised Elgin. Kirkland & Ellis LLP served as counsel to Audax Group. GE Antares Capital, Madison Capital Funding, and BMO Capital Markets led the senior debt financing and PNC Mezzanine led the subordinated debt financing to support the transaction.

We’ve always been a big proponent of unitranche debt. With senior cash flow debt still difficult to come by, unitranche facilities have proven to be a very attractive alternative financing technique. We’ve been pleased by the larger hold sizes of unitranche providers compared to senior debt providers. Fewer parties in the capital structure often results [...]

The mid-market investment bank Lincoln International has opened a Moscow office, and appointed Andrei Joosten as the managing director who will lead the region (or, more specifically, Russia, Ukraine, Belorussia, Armenia, Azerbaijan, Kazakhstan, Uzbekistan, Kyrgyzstan, Moldova, Turkmenistan, and Tajikistan). Lincoln has 11 other offices around the world, including in Madrid, New York, and Paris. Joosten, who [...]

Two weeks ago, many of us gathered in New York to attend the Symposium on Middle Market and Mezzanine Finance, an annual event where many of the leading providers of junior capital convene to discuss the state of the market.

Interestingly, the attendees were rather upbeat. Yes, participants were realistic and conceded that leverage levels had risen dramatically, particularly in the last two months and, for larger middle market transactions, are approaching 5.0x total debt to EBITDA. They also acknowledged that pricing had declined during this same period with mezzanine pricing, even on smaller deals, hovering around 14%, and unitranche pricing declining 100-150 bps.

We’ve seen it before. In fact, every time the financing pendulum swings in one direction or another, the talk starts – “Is mezzanine a dinosaur?”

It happened when CLOs emerged and cash flow senior debt providers dipped lower in the capital structure, minimizing the need for mezzanine debt. It happened again when second lien debt entered the middle market and became a competing product. It happened (and continues to happen) when BDCs became a new source of financing and it’s happening once again as unitranche loans gain in popularity and crowd out mezzanine debt.

In fact, mezzanine’s demise has been predicted so many times, I hate to bring it up. Yet this time seems a little different because more and more mezzanine funds realize they need to morph into one of two models.