According to a report from Fifth Street Asset Management, in 2015, sponsored middle market loan volume reached $50.3 billion, down 28% from 2014, falling below expectations and capping the weakest year for volume since 2009. Issuance dropped every quarter year-over-year, and Q4/15 was no exception. Despite volume rising 7% from the third quarter, at $13.4 billion, fourth quarter volume was still down nearly 25% from the prior year period.

For many lenders, including Fifth Street, the typical seasonal push that occurs at calendar year end was muted in 2015. A number of factors contributed to the protracted slowdown in sponsored deals, including an increase in borrowing costs and buyer/seller divergence stemming from lower deal quality and lofty valuations, as strategic buyers continued to drive up multiples. Combined, these factors have created a more challenging environment for sponsors, many of whom we believe have chosen to wait on the sidelines in hopes of better returns.

Click here for the complete report.