Increased financial-sponsor activity and higher demand from nonprivate-equity-backed companies for debt will make for a busier 2012 for KeyBanc Capital Markets Inc., the investment banking arm of KeyCorp, according to Managing Director Bob Scelza, who heads KeyBanc's leveraged-finance group.

KeyBanc's leveraged-finance group, whose clients are split about 80%/20% between sponsored and nonsponsored companies, estimated its lending activity will be up 15% this year over 2011 in terms of the number of transactions it backs and absolute dollar volume, Scelza said.

Scelza's projection is in line with those of other midmarket-lender players, who anticipate opening spigots wider this year for companies that seek credit for purposes ranging from acquisitions to equipment financing, debt restructuring and dividend payments.

"We are starting to see more and more transactions in the middle market," Scelza said.

There are two primary drivers of the activity, he added. On the smaller end of the midmarket, companies are looking to take advantage of more-favorable terms to refinance their debt, sometimes paying out dividends along the way, as well as amending terms of their credit facilities and extending debt maturities. Meanwhile, the merger-and-acquisition pipeline has been extended from last year, creating a need for acquisition financing, Scelza said.

KeyBanc's lending levels in 2011 were up significantly from 2010 — 30% higher in terms of the number of transactions backed, and 57% higher in terms of dollar volume, according to Scelza. The exact amount of lending for those years wasn't disclosed.

KeyBanc Capital Markets will continue to hire bankers to beef up its team, Scelza said. The firm now employs 530 bankers, up from 490 in 2010, with the increases made within its aerospace, building-products, logistics, food-and-beverage, and restaurant industry practices, among others.

"This year we will continue to grow...[and] strengthen and bolster our industry groups," Scelza said.

KeyBanc invests in or arranges debt, including first- and second-lien loans, high-yield bonds, mezzanine debt and preferred equity.

It is one of several midmarket lenders that have said recently they anticipate higher levels of lending this year, including senior-debt-and-unitranche-facility lender Monroe Capital, specialty-finance company NXT Capital, and business-development company Fifth Street Finance Corp.

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