Reorg Releases Its Latest Rankings Showing Churchill, Antares, Apogem Among Top 2023 U.S. Direct Lenders
May 08 2024 - 9:02AM
Business Wire
Activity picks up at the end of the year and
terms loosen as competition intensifies
Reorg, a global provider of credit data, analysis and
intelligence, has released its 2023 U.S. Direct Lender league
tables data. The league tables rank U.S. direct lender activity in
2023 across factors including loan size, use of proceeds and
sector. Additionally, the report explores overall deal flow in
2023. With the U.S. Direct Lender rankings report, Reorg is the
first to publish rankings across all three global regions,
expanding the availability of private credit news, data and
analysis available to the global credit community.
U.S. direct lending activity was off to a slow start in 2023, as
recessionary concerns, prolonged high-interest rates and subdued
M&A activity challenged deal flow in this space. However, with
better-than-expected economic growth and moderating inflation
toward the end of the year, deal activity rebounded. A third of
direct lending activity by deal count during the year was in Q4’23.
As the year progressed, the share of larger deals (those with a
total deal size above $150 million) increased, reaching 64% of the
total in Q4’23, up from 43% in Q1’23. Conversely, the share of
lower mid-market deals (total deal size of $150 million and below),
declined to 36% in Q4’23 from 57% in Q1’23.
M&A lending represented 72% of the total deal count in 2023,
but only 34% of M&A deals were for leveraged buyouts. A
disconnect between buyers and sellers’ expectations, among other
factors, hindered LBO activity. Direct lenders stayed busy
financing add-ons for existing portfolio companies. Refinancings
also kept lenders busy in 2023, grabbing 17% of the year’s total
deals.
With fewer opportunities to put money to work, terms became more
“borrower friendly” as competition intensified, especially for
high-quality assets. Spreads on first-lien term loans/unitranches
tightened each quarter, closing the year at an average of 589bp,
almost 40bp below the Q1’23 level. Discounts also tightened to an
average of 98.3 in Q4’23 from 97.5 in the first half of the year.
Meanwhile, total leverage widened to 4.9 times in Q4’23 from 4.5
times in Q1’23. In Q4’23, more than half the deals had a total
leverage ratio of at least 5 times. That’s an increase from 30% of
the deals in Q1’23.
Given the high-interest-rate environment, a lot of focus was
placed on coverage ratios in 2023, not only of existing portfolio
companies, but also when structuring deals. The average interest
coverage ratio on deals done in Q1’23 was just over 2 times. In the
following two quarters this ratio declined to 1.84 times, but then
inched higher to an average of 1.93 times for deals done in
Q4’23.
Darren Maharaj, Director of Leveraged Finance Data at Reorg
said, “Private credit has arrived and is here to stay. Market
participants have grown far more sophisticated since the lessons of
the global financial crisis and they look at the interplay between
asset classes, not just through a singular lens. Reorg is
delivering the intelligence and tools to help market participants
better understand the nuances and opportunities that exist, across
the entire credit spectrum from origination to performing and
distressed.”
Access the full report here.
About Reorg
Founded in 2013, Reorg is the essential credit intelligence and
data asset for the world’s leading investment banks, buyside
advisory firms, asset managers and hedge funds, law firms and
professional services advisory firms. By surrounding unparalleled
human expertise with proven technology, data and AI tools, Reorg
unlocks powerful truths that fuel decisive action across financial
markets. Visit reorg.com to learn how we deliver rigorously
verified intelligence at speed and create a complete picture for
professionals across the entire credit lifecycle. Stay current with
Reorg on LinkedIn.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508490874/en/
Media Drake Manning Drake.manning@reorg.com Katie Creaser
Reorg@icrinc.com