Survey Cites Debt Slowdown
As debt markets see little movement, recent acquisitions require innovative solutions in place of favorable loan terms.
June 23, 2009
There has been little movement in debt markets, according to a study by Gotham Consulting Partners, as 35% of private equity respondents said credit is not available at all.
The consulting firm’s annual survey polled 278 individuals at 189 private equity firms for their projections of the deal market. Despite a rise in optimism among many deal pros, the report still showed a reluctance among PE firms’ lenders.
Making new investments is still a challenge, as lenders remain cautious. Among the paper’s results, 77% of the survey’s participants said lending terms are less favorable than a year ago, while 74% said lenders now require more equity participation from firms.
Among those deals where firms are able to obtain financing, firms are looking more creatively at loansources. When Rock Hill Capital Group recapitalized SouthWaste Services Inc. in May, the Houston-based private equity firm sought additional debt financing from SouthWaste’s existing lender, Macquarie Bank Ltd., instead of trying to arrange a loan from a third-party lender.
At the time, Randall Hale, managing director of Rock Hill Capital told MergersUnleashed sister publication IDD, “We're spending a lot of time focused on deals that have built-in leverage, targeting situations where there's already an existing relationship from a banking perspective. We take some leverage off the company by buying some equity, and in exchange for that, we get some new leverage with new terms."
In May, ICV Capital Partners LLC bought a control stake in PFM Group. The investment firm used senior debt financing from Susquehanna Bank and TriState Capital Bank, two community banks in Pennsylvania, as oppsed to more typical mid-market lending resources.
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