A loan’s creditor protections may not be nearly as important as the issuer’s private equity sponsor when it comes to pricing.
In a new study by Chicago Law’s Vincent Buccola and Drexel’s Greg Nini, the duo explores how the market is responding to sponsors who pursue LMEs. After reviewing nearly 2,000 first-lien term loans issued between 2016 and 2025, they argue that sponsor identity is heavily priced into loans. Specifically, they found that for similar loans aggressive sponsors like Apollo, Platinum Equity, and Clearlake Capital have to pay a premium for their deals and this effect can’t be easily explained by other factors. An aggressive LME “requires both contractual capacity and a willingness to use it” they write, and while capacity is common, willingness is less so, and because of that lenders will push back in the form of pricing.
Buccola and Nini have found that pricing for Apollo deals come with the highest premium, a full percentage point — 100bps — more, relative to the sample mean yield to maturity of 717bps. And they contend that collectively sponsors who have pursued an LME “carry a statistically significant premium of about 20 basis points,” with a spread of...
