Daily News: December 13, 2012

CIT: PE Firms Drive Pricing to Pre-Crisis Levels

Private equity firms are racing to beat the fiscal cliff and have increasingly accessed the debt markets this year as readily available capital has allowed them to refinance and recapitalize their portfolio companies, so much so that it’s driving pricing to pre-crisis levels according to Tom Hobbis, managing director and co-head of CIT Sponsor Finance.

This is one of the many topics Hobbis covers in “Financing the U.S. Middle Market,” the latest in a series of in-depth executive video Q&As featured in CIT’s Executive Insights video series.

Hobbis indicated that the market is fairly receptive to good middle market credits, saying: “There’s an active pipeline across a variety of industries so deals are getting done. If there are problems moving deals, changes in pricing or amending structure or upfront fees can get the deal done.”

Stable businesses with recurring revenue streams are attractive because their future performance is easier to predict. “The reason private equity firms put leverage on deals is because it enhances their returns and makes them more profitable,” said Hobbis. “This is critical since private equity firms live from one fund to the next and having better returns makes it more likely they will be able to raise future funds.”

Private equity firms are always looking to grow their companies and their portfolio businesses. “There’s a natural tie into helping these companies grow, and providing financing fuels the engine that drives the small and middle market,” said Hobbis. “There’s absolutely a correlation between the success of the middle-market companies we finance and the communities in which they