Current interest rate range for various types of debt
Hey guys, was wondering about the case studies that don't provide interest rates on various trenches of debt. What's an acceptable range for each type currently? (e.g., RCL, TL, Senior Sub, Mezz.?)
I have been doing:
RCL: L+350bps with 50bps floor
TL: 4-6%
Senior sub: 8-10%
Mezz: >12% with portion of it in PIK (~5%?)
Does this sound right to any experienced modelers here? Or where could you find the latest rates info? Thank you!
Seems directionally correct for standard ranges but will vary a lot with respect to the company, leverage, etc.
Is this a JunkCo? 4-6% for senior debt is 300-500 bps over UST10, that's BB- to CCC range. Would probably bump everything down 1-2% if this is a normal mid/low IG company.
Just an aggregation of what I have seen in different cases that I used to practice (some of them are really old, before the rate nosedived), really appreciate the color - would you happen to know a good source of these stats when you are in banking?
https://www.wsj.com/market-data/bonds/benchmarks
Bloomberg is better if you have access. For loans LCD (ask your boys in LevFin)
This seems a little off, I’d maybe go about it like this if it’s a down the fairway type of deal:
Unitranche - L + 500 - 700
1L / 2L - L + 400 / L + 700-900
mezz - usually nowadays mezz comes in on either smaller deals or they end up taking equity chunks or they take the 2nd liens. For kicks, say it’s a preferred note and something like 10-12% all pik sounds right
Also I’ve seen floors of 75 bps on aggressive bank deals that are widely syndicated. If you’re in Private land, should expect floor of 100 bps
Appreciate the color! Any good source of info for these things?
Lcd comps / debtwire / levfin insights / cs hy index.
I answered this in detail somewhere if u look thru my thread of comments but it was a while ago. Otherwise I can follow up if I find it... But I would tweak a few things off the bat:
Unitranche: L+575+ at a minimum (575 are the mega $1B+ deals getting done at) 1L /2L TLB: have a 400 bps difference between the 2, whatever u decide. So L+400/L+800
Size is important, as well as single lender / club vs broadly syndicated. In the LMM world we’re seeing unitranche debt in the 3.5x-4.5x leverage range for companies with $3M-$10M of EBITDA going for L+650-800 with no/minimal amort and typically a 98 OID
Quaerat sed porro quos consequatur aut. Dolor hic qui placeat doloremque consequuntur qui eaque. Recusandae in quasi magni fuga iste accusantium voluptatem. Veritatis tempore expedita hic quaerat. Aliquid ut praesentium ullam voluptatem explicabo est aperiam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...