As someone that's always believed in a free market environment, it's my experience that pricing and leverage will most always find their proper levels. From the perspective of buyers of loans, I think that there's really good value today at the current pricing, because the risk levels are not excessive. From an issuers' perspective, the pricing is actually very reasonable. I think we're in a really good period of balance, where risk and return are at fair levels.
Where to Find Activity
To say one sector is hot or is not is difficult. Perhaps we're seeing a little more activity in healthcare and aviation. But across the field we're seeing really good volume of inquiry. The only sector that has seen some recent bumps is really a subsector of energy. We're seeing some reluctance to play in the oil and gas exploration and development side of energy services until things further stabilize. However, on the other side of energy, the power side for instance, we're seeing a lot of activity and really good transactions. Just recently, we announced that we provided a $75 million senior secured credit facility to an affiliate of
AES Distributed Energy, Inc., a subsidiary of The
AES Corporation, to finance its acquisition of residential solar systems across the United States through its MySolar
Private Equity and the Middle Market
Traditionally, private equity sponsors, at some point in time, break and start investing more heavily because they have a certain amount of time to put their funds to use. That has happened continuously over the last several cycles. So far, they've been more disciplined in this cycle, although every now and then we see a sponsor really going for it. However, for the most part they've maintained discipline and I think that's going to continue through the remainder of this year. I think that the trend will continue up until the point where the equity sponsors have to return capital. Then they will ask themselves a question - "can we perhaps make an acquisition and accept a lower rate of return in order to use this capital or should we just return it back to our LPs?" In the past, they've made the decision to accept the lower rate of return.
I anticipate that this time they will do the same.
Neil Wessan is Group Head and Managing Director of
CIT Capital Markets. He manages teams of market professionals who structure, price, underwrite and distribute financing packages including derivative products for all of CIT's product lines. He received a bachelor's degree in economics from the Wharton School of the University of Pennsylvania and an MBA from the University of Chicago Booth School of Business.
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