Private debt credit spreads

I'm curious about what rates are like on private credit right now - particularly senior secured loans vs mezz debt. I would have guessed  ~L+400 for senior secured loan to a typical investment grade company. In your experience, what are the general going rates for investment grade companies when it comes to these two types of loans? Just curious because yield date on private debt isn't as publicly accessible as, say, bond yields.

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Oct 16, 2021 - 4:38pm

Senior secured at L+400 to 650 in the middle market. Floors still at 100 but some new issuances at 150 or 200 bps (or based entirely on SOFR…). 2L at L+800-850 typically, with the same floor but no amort. These companies tend to be rated around BB or BBB but can even be in the high C's (remember if you're A-rated you don't use private lenders). Regardless, private credit doesn't really use credit ratings outside of FIG

Some large DLs are underwriting large unitrache facilities at L+550 to 650. Lots of new "late stage" lending programs for high enterprise value growth businesses, or bridge financing for companies close to public markets. OIDs on these facilities provide fantastic capital appreciation

Mezz is really hard to pin down because it relies entirely on the industry and collateral value. I would say anywhere from 9-20% could be fair, with 20% representing stretch mezz or lend-to-own. Hospitality assets can get up there too in the current environment, especially if they're under development

Finally, issuances in 2020 and 2021 have been insane. Cov-light at an all-time high and tons of capital chasing relatively large number (but still not enough) deals. Interesting to see how this plays out in next 24-36 months, or even in 60-72 when everyone needs to refi

Oct 16, 2021 - 8:29pm

You can look at the holdings listed in the 10K of BDCs and look at the more recent paper to get a sense. 

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Oct 16, 2021 - 9:25pm

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