Discounts on first-lien institutional term loans haven’t been this wide since 2011. The average original issue discount (OID) is 98.02 so far this quarter, almost on par with 4Q15’s 97.98 average. Only 13% of first-lien institutional term loans have been done at an OID of 99.5 or narrower this quarter, slightly down from 16% last quarter. This is a complete shift from 2Q15 and 3Q15, when 78% and 60% of the deals, respectively, were sold at that level. Meanwhile, 28 percent of the deals done so far in 1Q16 had discounts of 98 or wider. 
Choppy market conditions have led investors to demand more to commit to deals. Credit Suisse marketed once again a reduced US$878m loan for Kraton Polymers at a discount of 92; the deal was ultimately sold at 90. The deal, which was launched in December, was funded in January at a price of 500bp over Libor and a 98 OID. SolarWinds deepened the discount on its LBO deal to 95 from 98.5. Other issuers like Vizient and Mattress Firm Holdings also widened their discounts. Both these companies issued their loans at 97. Not surprisingly, the average yield, assuming a three-year term to repayment of 6.45% this quarter is at its highest since 2Q12.
Contact: Diana Diquez
diana.diquez@thomsonreuters.com
Latest news
PIK Your Next Adventure
Every amended PIK loan hits the same crossroad. Not everyone ends up at the same destination.
Top 50 BDCs Accounted for 75% of Nonaccrual Loan Cost in Q2’26
The 50 largest BDCs, on the basis of total debt investments as of the second quarter of 2026, accounted for 75% of the total aggregate reported value of nonaccrual debt at cost and fair value.
Private Credit Defaults 101: Beyond the Noise
Like any good school year, this series went by fast. But unlike the end of the year, we’re not out for the summer.