Driven by the current merger wave, leveraged lending has become a major profit engine for banks. Volumes are at their highest level of the decade. Margins, although under pressure, are still attractive. Banks are eager to consider these credits compared to unattractively priced investment-grade loans.
The leveraged lending renaissance is in stark contrast to declining capital markets activity. Hampered by higher interest rates, competing high yield bonds, and 144A private placements, issuance has declined.