In February, the Fed clarified a point in the guidelines that says borrowers should be able to repay senior debt within five to seven years. The Fed said it would be concerned if the bulk of a repayment happens toward the end of the five- to seven-year period.

But this clarified point isn’t compatible with the add-on acquisition strategies of some PE firms. The Fed generally starts flagging transactions that are at 6x leverage. As far as middle-market deals go, this affects only a small percentage of transactions in the upper middle market, and fewer deals lower down in the market.

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