September 2022 Debt Advisory Market Update

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While the markets continue to function (albeit at higher pricing and moderately worse terms), summer vacations were in full effect as the end of the summer saw a slowdown across the board.

  • Rising rates and a summer slowdown made July the lowest direct lending volume month since March with $9.5 billion of total deal volume
    • Only 28% was for true new issue (LBO or M&A), the lowest percentage since February
    • August was presumably similarly slow, although data has yet to be released
  • While it’s yet another datapoint pointing towards a slower economy, very few lenders I speak with remain overly worried
    • Twin Brook, for example, has already announced 5 deals in September after completing 8 transactions in August
  • It is important to note that most of the slowdown has occurred at the higher end of the market as some mega-funds have cut back their ticket sizes
    • There were no jumbo deals ($1 billion+) closed in July, although there were 2 in August (Avalara and the analytic solutions segment of PerkinElmer)
    • Owl Rock, Apollo, HPS and others remain active on this front, although at a slower pace than over the past few years
    • Lenders that play down market seem to be offering firmer packages given smaller fluctuations in inflows from the pension funds and other institutional investors that comprise their LP base