Not a good start to the year - LBO DCM in 2016

Among others, I've been holding my breath for early signs of how the LBO debt market would fare in early 2016. Petco was the deal that a lot of people had their eye on.

Pricing on the first lien has come out and signs are not positive. From LCD News:

LCD NewsA Citigroup-led arranger group this morning offered revisions to the $2.5 billion institutional loan backing CVC Capital Partners and Canada Pension Plan Investment Board’s acquisition of Petco Animal Supplies, including sweetening pricing and carving out a B-1 tranche with a higher spread but no LIBOR floor.

The arrangers boosted pricing on the seven-year term loan to L+475, with a 1% LIBOR floor and a 98 offer price, which compares with original guidance of L+450, with a 1% floor and a 98.5–99 OID, sources said. The B-1 carve-out, which will be sized at a minimum of $500 million, is talked at L+500, with no floor, also offered at 98.

At the proposed guidance, the TLB offers a yield to maturity of about 6.26%, which compares with 5.8–5.9% at the original guidance. The B-1 tranche would yield 6.12%. Note LCD’s yield calculation does not take into account the forward curve; three-month LIBOR stands at 62 bps this morning.

For those in DCM teams, what reactions have you seen? Are we in for a quarter of widening spreads and hung deals?

For those in private equity, to what extent have you guys expected this? How will it shift the types of deals you'll be targeting?