That’s because the middle market is simply not strong anymore, particularly on the lending side. Take GE Capital, which today revealed cracks on the wall:
G.E. said it was seeing rising delinquencies on its consumer and commercial finance business. It plans to set aside provisions for pretax losses of $6.6 billion this year, a sharp rise from 2007, and it expects losses to rise next year to $7.5 billion to $9 billion. (NY Times)
This supports yesterday’s story in The Deal, which reported GE Antares has suspended new financing until January (sub req):
Chicago-based GE Antares, which dominates the middle market, has walked away from commitments and even pulled staples, sources said.
It's true that GE is, for the most part on the sidelines, a source told me, but the firm is still looking at deals. Same goes for Madison Capital, which is rumored to be closed for business. “They’re saying yes. Not often, but they’re still saying yes to conservatively levered loans with low loan to enterprise value and a lot of equity.”
"Not very often" is pretty damaging, when it's the two largest mid-market lenders. In Q3 '08, deal volume was down 22.2% from Q3 '07, which was a post-credit crunch quarter itself. This week alone, peHUB tracked a mere 17 new deal announcements. Depending your size threshold for middle market, most of these deals barely even make the cut.
The middle market even was down at the start of this year, when a headline