COVID impact on LBO debt
What do you think the COVID impact is/will be on % debt used in LBOs, the spreads on that debt, and covenants, especially for tech LBOs?
My understanding is that even though the rates are down, the spreads have increased to reflect distress/default risk, so overall, the spreads are up.
Also, where would be a good place to find reports/data on keeping up with the LBO debt markets. My firm does not have access to any data provider (CapIQ, BB, etc.)
It's a good question. The debt markets, especially for LBOs, are absolutely frozen so no one really knows what the impact in the near-term is going to be. No one wants to underwrite a deal with so much short-term uncertainty
Same thing that happens in any risk-off environment. Credit dries up and spreads blow out. In a less draconian / extreme market, new financings see spreads widen, minimum % equity checks increase / leverage multiples decrease, tighter covenants, and usually clear bifurcation between good credits and suspect ones, where market largely open for good credits, and limited interest in dicier credits.
Where to keep up... bankers usually send out weekly summary decks to their clients. Ask your bankers to get on distribution. It’s largely marketing materials for them, so they have no issue adding more people to it. S&P LCD also good, if you can get access.
What is S&P LCD and how does one get access?
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