Deal Spotlight
Direct Lending Deal Spotlight: Sponsor-Backed Transaction
Breakdown of a middle-market deal structure and pricing trends.
Deal at a glance
- Borrower: U.S. middle-market services company (~$50MM EBITDA)
- Sponsor: Repeat upper mid-market PE firm
- Facility: $300MM unitranche TL + $50MM revolver
- Leverage: ~5.0x total debt / EBITDA
- Pricing: SOFR + 600 bps, 1% floor, OID 98, 102/101/100 call
- Tenor: 6 years
- Covenants: Springing leverage; RP block until <4.0x
Market context
This transaction priced broadly in line with other upper mid-market sponsor unitranches. Spreads have compressed ~100 bps in the past 18 months, but base rates keep all-in yields in the low double digits. Repeat sponsor relationships clear with higher leverage and lighter covenant packages.
What it means
- For managers: Certainty of execution and sponsor ties are key; unitranche pricing still attractive, but covenant control matters.
- For allocators: Yields remain compelling, but watch leverage creep and covenant dilution in late-cycle deals.