Despite all the geopolitical noise domestically and around the world, the stock market continues to soar to new highs and private equity and debt markets are following suit. If you or your clients are thinking about raising capital, there may never be a better time.
As we head into the holidays, we see:
- A number of our clients in the “better for you” consumer products space preparing to launch growth capital raises in Q1’20.
- An increase in companies pursuing debt dividend recaps to take advantage of recent interest rate reductions.
- Commercial banks tightening their credit boxes while direct lenders continue to aggressively look to put money to work.
- An increasing number of direct lenders who had traditionally focused solely on sponsors expanding their scope to include entrepreneur-owned businesses.
A few interesting things to note on a macro level:
- The global leveraged loan market is more than $2.2 trillion, which is comparable to the U.S. subprime mortgage market ahead of the 2008 financial crisis. Leveraged loans in this context are defined as loans in excess of 5x EBITDA.1
- Fundamental analysis is becoming more prevalent as recent earnings calls show a renewed focus on margins and metrics favored over tremendous growth stories with unsubstantiated profitability.
- Amid leading recessionary indicators, the Federal Reserve continues its practice of overnight repurchase agreements supplying additional liquidity to the market and encouraging banks to continue inter-bank lending.
- There has been increased activity in the origination of collateralized loan obligations (CLOs) within the middle-market as evidenced by increasing volume and new entrants to the space. CLOs are structured securities backed by pools of leveraged loans to businesses. Middle-market CLOs have rapidly increased in prevalence, which may encourage commercial lenders to stretch underwriting criteria as investors seek current yield in what seems to be a peaking macro market.
Intrepid’s Capital Markets team partners with entrepreneurs and financial sponsors to achieve their goals while maintaining close connections with potential investors across the capital structure to facilitate the best possible financial and strategic partnerships for our clients.