Current interest rate for LBO debt
Curious where interest rates are to finance an LBO for a mid market company? Probably around SOFR + 6-700 (all-in 11-12%)?
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Been seeing 5-600 last few weeks. Just was able to refi one of our portcos to 525 last week
Seems very low? It would be more like 13-14% all in
Reads we've been getting in January have all been below 600, have seen material pricing declines vs. last year
Depends on the credit rating of the business of course. But assuming it isn't distressed credit can typically get SOFR + 450-550.
We refinanced two portcos ($5bn+) in the last three months for 475 / 500 respectively
So about 10% interest?
Unitranche or bank debt?
Could probably get it both from both markets, depends on the OID these days really
Depends on size of the business, the smaller end of MM then the more expensive it will be. True MM (call it $30-$50mm of EBITDA) is getting done at 525-550 over right now.
Why would LMM deals have higher interest rates?
The question was asked generically, so I answered somewhat generically. Obviously its situation dependent - a 3x leverage structure on a 15x purchase price will have lower pricing than a 5x structure on an 8x purchase price. But in general, smaller companies are [perceived] more risky. A business with $5mm of EBITDA has many fewer levers to pull in a downside than a business with $40mm of EBITDA.
That's insanely cheap considering capital call lines price for SOFR + 2-300...that's basically risk free money yet LBO debt is only SOFR+500? Sounds very funky.
God bless the capital markets
LBO interview question: what does the cost of equity have to be to make the deal good?
20%?
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