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Cerberus Capital Management's roughly $1.5 billion buyout of DynCorp International-a deal that will yield $1.17 billion in debt-is just the latest sign to portend the reemergence of the private equity-related loan deal.
"Private equity has a lot of money to put to work, and institutional investors are still seeing strong cash inflows that need to be invested, so conditions are attractive for new deals," said Mark Oline, head of corporate ratings at Fitch Ratings.
Leveraged loan issuance in the U.S. rose to $85.244 billion in the first quarter from $27.522 billion in the same period a year ago, according to Thomson Reuters. And market participants expect the level of issuance to be even higher this quarter, mainly because private equity firms are poised to ink new deals.
Indeed, the number of private equity acquisitions in the first quarter increased by 10% to 305 transactions from 277 transactions in the fourth quarter of 2009, representing the third straight quarterly increase, according to PitchBook, a publication that tracks private equity deals. If the level of deal flow activity continues, the private equity market is on pace to finish 2010 with more than 1,200 deals, a 14% increase over 2009 levels.
Of course, much of this volume has come in small to midsized deals. In the first quarter, there were just five deals above $500 million, according to the PitchBook report. Low-cap and mid-cap deals under $50 million were the most common...