debt costs

How big? What industry? How profitable is the company?

Given some of those characteristics you can get to a range. The way you have the question worded now, it's almost impossible to answer with anything that is reasonably accurate

Don't sell yourself short. Round up 100 community banks and do it at L+250

To add to what fryguy22 said, the question is also meaningless without specifying which tranche of debt you're talking about. The risk is very different for a revolver or for a secured term loan at the top of the capital structure, than it is for mezzanine debt.

Margin is largely a product of credit risk. Credit risk varies by underlying business and your position in the debt structure. You've provided no information on any of this.

So, what the hell, LIBOR + 900bps

Everybody above me is an asshole.

For reference I am seeing 2.5x/4.0x - 3.0x/5.0x leverage (this means senior/total leverage) for deals with $5 - $15 million of EBITDA lately. Senior pricing has generally been L + 250 - 350. Sub debt has been 10% - 14%. I have seen unitranches at L + 750 - 850. LIBOR floors generally 150.

Agree, though I haven't seen sub debt quite that low. Have seen a few deals at L + 200 still, though neither was an LBO.

That makes no sense, Fryguy22 had the right view up top. It is completely dependent on what the industry is, what the financial profile of a company looks like, etc.

For example, your 4.0x-5.0x total debt for something with high capital intensity and cyclicality (think construction materials requiring large scale manufacturing, something like that) would be down in the C's range, aka you would never get it done (since nothing originates at that rating).

On the other end, some sort of consumer staple with a good brand name, low capex and recurring revenue could easily support that debt and rate somewhere up in the BB- area, pricing pretty well inside an LBO. So again, completely dependent on the industry and company profile.

Assuming your comment above was meaning to target B2/B area (typically the lowest rating firms will solve for in order to lever up companies), those rates are too high. Leverage markets are still very hot right now (after softening a bit this summer). The first tranche is probably in the right zip code, maybe slightly high, but second lien you're looking something more in the 9-10% range (all in, OID included), assuming you're putting a decent 35% equity cushion. Maybe a point or two higher if you're between 25-35% (either way 14% is WAY too high). Can't think of a specific example off the top of my head, but I think I read about something on Dealbook with a small company pricing in the ~9% range for second lien, high leverage deal. Read on there in the PE section, you'll find something that should help

Thanks guys! Makes sense that there's no specific range but was good to hear how you guys think about the cost of debt