Morgan Joseph TriArtisan’s newly issued Recapitalization & Restructuring Report says that across most sectors of the debt capital markets, inflows and issuance volumes are approaching, or have exceeded, pre-crisis highs.
It points out:
However, with M&A volumes stagnating since 2010, most debt issuance has been utilized for recapitalization and repricing transactions. The lack of de novo loan demand from growth has put additional downward pressure on rates, with loans and high yield index yields at or below all-time lows.
Says Jim Decker, a managing director who heads the group: “The lack of demand for debt capital, despite attractive rates and terms from lenders, is akin to the housing market of 2010-2012, when home buyers held back because of a lack of confidence or available capital for down payments. Middle-market deal making has a similar feel, as financing widely is available but private equity buyers remain disciplined on pricing and deal volumes given the muted fundraising environment, declining dry powder and a glut of yet to be exited investments.”
Private equity fundraising remains stuck in neutral, despite all the capital being put in play in the leverage markets. Capital raised for private equity funds has lingered at approximately $100 billion annually for the last two years, 35% to 40% of the highs reached between 2006 and 2007.
Elsewhere on the financing scene, the Morgan Joseph TriArtisan Group observes: