When will Lev Fin be back?
Seen a lot of talk about LevFin being dead right now and was wondering what has caused this/what needs to happen for it to be alive again.
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It’s not dead at all. There was a 2-3 week period in April where issuance went dark/got shelved due to liberation day, but debt markets have rebounded strongly since then. We’ve been seeing some LBO issuance, refi’s, and a large amount of dividend recaps as well in recent weeks. Not really sure what your post is referring too.
It's not very hot rn, it had a pretty big period of being hot. For what it's worth, from the corporate side: have been told by various bankers that they are still shaky on the market right now, and it's not as frothy of a market as it was pre-tariffs. I cannot comment on whether if dead or not, but it's definitely significantly weaker than it was just a few weeks ago.
I never said it was "hot" right now, simply explained the current situation to OP. We've seen significant spread tightening, growing investor demand, and increasing issuance. In May we saw the most high-yield bond issuance since September 2024, and leveraged loan issuance has been improving as well. It definitely cooled off in the past week or so for sure though.
Not exactly hot but not really dead
There's simply no substitute for lower interest rates.
There's no getting around the math of how much leverage you can put on a business before coverage & FCF get stretched too thin. S+600 private credit was exploding when that meant 7%. Now S+500 is roughly 9%. Not as many deals pencil.
This is by design, by the way. The whole point of the Fed raising rates is to slow growth to prevent inflation. But until rates come back down, all of PE and Lev Fin will be stuck in the mud.
Not completely grid locked, mind you. You will still see risk on / risk off and HY market open/ close month-to-month.
But it's like the economy is a golf cart with a speed governor engaged.
Fed’s Powell cautions about higher long-term rates as ‘supply shocks’ provide policy challenges
Yeah but BSL are also printing in the 3 handle, no? I’m on the PC side and there’s margin compression here too, but BSL spreads seem especially tight compared to where we are
How will this affect return rates for levfin SAs?
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