Sup Monkeys,
I took a long hard hiatus from WSO and I'm dusting off the whiskey glass to talk about a field in finance that I'm surprised I see less of, Sponsor Finance Lending. What I mean by this is a bank or mezz lender working with PE firms, Search Funds, and Family Offices to provide the capital they need for acquisitions, dividend recaps, refinancing, etc.
Everyone I see on LinkedIn is connected to our main man Patty C. but I'm not seeing any conversations about it here. Below is what I'm seeing, while my team is industry agnostic and we lend nationwide, it might be helpful to note that my team is a Bay Area bank in the LMM.
- Term - Gone are the 5 year maturities that were more popular 3 years ago. Now to remain competitive, Banks are offering at minimum of 6 years.
- Pricing - If you're offering anything above 5%, you have almost no chance here as well. We are seeing Prime + 1% or LIBOR + 3% (don't get me started on LIBOR).
Any other Lenders or Sponsors out there open to sharing their thoughts? I'm hoping the above can be a starting point and the conversation opens up as it gets going.
Cheers,
Gator10.
Not sure if I read this wrong but there are tons of banks and credit funds doing sponsor finance (providing debt for LBOs/M&A/Div recaps/CapEx). The LMM space is definitely less crowded than mid-middle/upper middle market, which are extremely competitive and dominated by the credit funds(direct lenders). The large banks pulled back on the space after the crisis and primarily stick to the UMM and large cap PE deals. In terms of deal terms, we have seen the same trend of pricing getting squeezed and longer tenors.
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