3.20.2007 / Michael Flock
Strong Debt Market Improves Prospects For Leveraged Transactions

Since 2004 senior debt markets have loosened substantially. Faced with competitive pressures, including new senior lending sources, traditional lenders are embracing more liberal debt coverage multiples and covenants. Aggressive cash flow and stretch lending is helping to facilitate increased flexibility on senior deals. Significant amounts of junior debt capital, as well as new debt products, further improve prospects for leveraged transactions. More aggressive lending and relatively low interest rates are facilitating higher debt capital components and higher total enterprise valuations in leveraged transactions. Combined with the liberalization of the senior debt markets, equity contributions to leveraged buyout transactions remain relatively high, which is helping to push acquisition multiples higher.