Ares Capital yesterday reported a big quarter for new issues, $2.4 billion across 50 borrowers, compared to $1.3 billion in the previous quarter and $1.9 billion in the same period last year.
Parts Town is coming to market next week via Golub Capital with a $788 million unitranche financing to back the add-on acquisition of Heritage Foodservice Group. The lender meeting, however, isn’t taking place in a fancy midtown hotel auditorium that can seat hundreds of investors. Instead, Golub is hosting a small group of invites to sell down only about half the deal.
The $945M financing for Integrity Marketing that was put away quickly and quietly last month not only shows how direct lenders continue to log wins for larger mandates, but also the wider premiums they earn bypassing the syndicated market.
Pricing on the unitranche loan that Owl Rock Capital, Crescent Capital and Antares Capital put together for the company closed at L+575, according to sources. That's 150 bps higher than the L+425 on the insurance broker’s previous first-lien debt. It's also well above current averages in the more broadly syndicated market.
According to S&P Global LCD, the average all-in yield is 5.9% across large borrowers this month. With 3-month Libor at 2.14%, that puts the average spread at roughly L+375 for syndicated issuers.
Against other unitranche loans — the tool of choice for many direct lenders —the Integrity Marketing credit is right in the wheelhouse of where the majority of unitranches have priced in 2019, based on data provided by Advantage Data.
Even in markets where established data infrastructure is limited, such as syndicated loans, reliable sources of data that are indicative of a liquid security’s value are available through market data vendors and broker quotes. When evaluating illiquid securities like middle market or directly originated loans, the effort of data aggregation becomes much more difficult and is often assumed to be an exercise in futility. We would disagree.