PDF | Research |Week of July 11, 2022
Quote of the Week
Policy makers…would be geniuses if they can soft-land this thing.
– Kit Juckes, macro strategist, Societe Generale.
Lead Left Vodcast
Portfolio Construction:
BSL and MM

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Relative Value in the Loan Market
(Part One)
In our series on portfolio construction [link] we looked at how liquid and illiquid loan managers assemble quality all-weather assets. Because of the contrasting characteristics and behaviors of BSL and middle market, PMs work differently to extract and maintain value.

In recent months, thanks to market volatility caused by higher interest rates, toppy inflation, and the perceived higher probability of a recession, large cap loan prices have traded down sharply. S&P/LCD’s leveraged loan index has dropped from 98.5 in February to 92 last week.

While an economic downturn would certainly increase the probability of loan defaults and losses, history shows that BSL default rates barely amounted to 8%...
Private Capital Call
Q&As with Jess Larsen, Founder & CEO, Briarcliffe Credit Partners.

Chart of the Week
Spreads Move, Premium Persists
The illiquidity premium for middle market loans is a staple regardless of how spreads change.
Source: Refinitiv LPC
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Stat of the Week
Loan Stats at a Glance 
PDI Picks
Fear recedes over fund facilities
Initial wariness over subscription finance has given way to acceptance – at least when it comes to brand-name GPs...
Leveraged Loan Insight & Analysis
Syndicated middle market loan volume
climbs in 2Q22 but lags year-ago period
Syndicated middle market issuance picked up in 2Q22 despite increased market volatility in May and June. Middle market lending climbed to US$48bn in 2Q22 from US$33bn in 1Q22 but was below the US$58bn posted in the same quarter last year...
The Pulse of Private Equity
Second quarter numbers
PitchBook’s latest US PE Breakdown is now live and available for free. Q2 2022 was another decline, with $234 billion invested across 2,176 transactions. The dollar figure is 21% lower than the first quarter and 38% lower than Q4 2021...
Contact: Alex Lykken / PitchBook
Covenant Trends 
Percentage of Loans that Cleared with
the Least Protective Documentation Scores
(5/5+/4-)
High-Yield Bond Statistics
Weekly fund flows source: Lipper
DL Deals: News & Analysis
Jumbo volume in 1H 2022 reaches $30.8 billion
to bring total tally to $86.5B
Volume in the first half of 2022 for private loans sized at $1 billion or more has reached $30.8 billion, a level that dwarfs the $9.5 billion recorded in the same period last year, according to Direct Lending Deals...
Private Debt Intelligence
Private debt dry powder at record levels
Private debt dry powder has climbed to record highs in recent years. Investors committed capital during the pandemic as a rush of opportunities in the distressed debt space was expected. Indeed, 2021 saw the highest annual aggregate capital raised...
Contact: Valerie Kor / Preqin 
Debtwire Middle-Market
First lien loan pricing spikes in June in tandem
with secondary market collapse
Source: Markit, BofA US HY Index
To open the year, loans were bid at an average price of 97.78, with approximately 20% of loans bid in the par-plus range. As inflation numbers started coming in hot, and as the war in Ukraine erupted on 24 February, bids slid more than 6 points to only 91.48...
Contact: Vincent Daigger / Debtwire 
Middle Market Deal Terms at a Glance
Select Deals in the Market
This publication is a service to our clients and friends. It is designed only to give general information on the market developments actually covered. It is not intended to be a comprehensive summary of recent developments or to suggest parameters for any prospective financing opportunity.