It’s been an eventful and often challenging year for the credit markets. David L. Hahn Jr., a finance partner at Davis Polk & Wardwell LLP in New York, discussed the subject on this week’s episode of Drinks With the Deal. Rising interest rates have been an issue with large buyouts, such as those of Citrix Systems Inc. and Twitter Inc.
Across several deals, bridge loans designed to be replaced at closing have instead been used to fund the transaction, Hahn said. There’s also been a slight uptick in restructuring and distressed financings, though the increase has been less pronounced than some market participants feared.
These developments come during a period of considerable evolution in the finance markets, most notably the rise of direct lenders — a “seismic shift” Hahn discussed. Some direct lenders can provide $1 billion for a single borrower even as they’ve instituted concentration limits, Hahn said. Direct lenders can also now syndicate deals and have the relatively new capability to create revolving credit facilities.
Liability management transactions in which issuers refinance or restructure their debt obligations have become far more common in recent years, in part because law firms and financial advisers have promoted them, Hahn said. Additionally, market practice has become more standardized in the field.
Here’s the podcast with David Hahn: