Fifth Street Finance
Corp. FSC released its September newsletter today.
Pipeline Building as M&A Volumes Rise
The cooler fall air is reinvigorating the M&A market. In the last several
weeks, we began seeing a significant increase in middle market companies going
to auction after a lackluster first half of calendar 2012. The increasing deal
flow is driven by several sources: (1) sponsors' desire to close deals by the
end of the year to show returns to their investors; (2) insufficient capacity
from new CLOs, due to lower leverage levels, to refinance maturing loans from
pre-credit crisis CLOs; (3) strategic buyers with large cash balances earning
negligible returns; and (4) uncertainty over the election, economy, capital
markets and tax policy. We expect Fifth Street will have strong originations
in the December quarter as our pipeline continues to grow.
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