Private equity firms have been using more and more leverage to complete large LBO loans, according to S&P Capital IQ/LCD.
The leverage creep of the past two years, managers say, is part of a larger trend in the new-issue market, where debt multiples have risen steadily from the cyclical bottom reached after the 2008/09 credit crisis.
The rising leverage has not pressured coverage ratios, however, which have been bolstered in recent years by a combination of EBITDA growth and low borrowing costs.
Indeed, the average ratio of EBITDA less capex to cash interest posted by S&P/LSTA Index issuers that file publicly climbed to 3.44x in the third quarter – the highest reading since LCD started tracking these figures in 2001 – from 3.36x between April and June. – Steve Miller
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