Private debt market update

September was the worst month in recent history for the loan market as lenders continue to struggle with inflation and uncertainty

Commentary

• Broadly syndicated leveraged loans lost 2.27% in September, their worst performance since the Great Recession
  • Some of this is simply fear-driven trading volatility that will have less of an effect on the private markets, but it is indicative of the current mindset of the lending community
  • For the year loans have lost 3.25%; while this is disappointing, the loan market has significantly outperformed both the bond market (-14%) and equities (-25%), a testament to its stability in volatile markets
  • As is usually the case in volatile markets, larger and higher-rated credits saw significantly less selling
• The primary markets didn’t prove much better with global M&A volume sinking to a decade low $642 billion in Q3 and US M&A volume declining to $278 billion; both are down over 40% from Q2
  • Similarly loan issuance posted its lowest quarterly volume since Q4 2009
• Arrangers in the broadly syndicated market continue to take their lumps most recently on the $16.5 billion LBO of Citrix
  • The $4.55 billion TLB for the LBO of Citrix pricing at 91 cents on the dollar
  • The financing also included a $4 billion secured notes offering priced at 83.561 to yield 10% and a $3.95 billion 2nd Lien bridge
  • Collectively arrangers lost over $500 million just on the TLB and bonds given they owned the debt in the mid-90s

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