What are rates at right now for PE?
This might be a silly question but as I study for modeling tests and the likes I haven't actually thought about what % rates are at right now for actual PE shops. I know debt has gotten relatively expensive compared to the near 0% rates a few years ago, but what are shops actually paying up?
Well the fed funds rate is above 5% now vs. recent history close to 0 as you mentioned. The FFR is the rate at which banks lend to other banks - naturally, some middle market shitco your midwit MD wants to buy is riskier to lend to vs. a stable bank hence a larger required return than just the FFR or SOFR. You’ll spread percents off SOFR (S+x, where x will be the size of the spread in basis points) but the size of the spread will depend on the terms of the debt and credit quality of the issuer.
As for current spreads someone else can give better numbers than me
Bain’s 2024 PE report states that the average LBO debt interest is 10%
Yeah makes sense. 5% base rate with 400-500bps spread for a high yield issuer.
S + 500-550
All our deals the last few months have priced here. Just closed a refi last week at 525.
How many turns of EBITDA are companies being levered at? Assuming less now but not sure
For SaaS I've seen 2-2.5x revenue; or 8-9x EBITDA for profitable/high quality assets
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