PE’s confidence is supported by much improved debt markets. Financing is available for a wide range of deal types, from refinancings and dividend recaps to new acquisitions. In the US, sponsored leveraged loan issuance broke a new record in 2013, totaling US$322.2b. Meanwhile in Europe last year, leveraged buyout loans saw their most active year since 2008, with €36.2b in new loans issued. High-yield bond issuance also reached record levels. These robust markets have so far continued into 2014. A tapering of quantitative easing in the US may, however, impact new issuance and increased borrower costs.
The improved availability of debt for PE acquisitions on good terms is complemented by an increasing amount of capital that funds have to deploy. For the first time in several years, dry powder increased in 2013. With US$399.8b available for investment, the world’s buyout houses have significant firepower to fund new deals. In addition, there is US$100b of dry powder set to expire in 2014, nearly a quarter of the overall total.
Courtesy of EY