Rocket Software's pulling of $725M of loans that would have refinanced existing debt and paid a nice dividend to its P-E owners was at least the third canceled deal in April. Six months after the OCC warned banks over deteriorating underwriting standards, investors are demanding better terms and have pulled cash from leveraged loan funds for two consecutive weeks after 95 straight weeks of inflows.
“The balance of power, for the moment, has a little bit shifted to the buy side,” says money manager Jonathan Insull. "The market’s been taking a breather and people are using the opportunity to push back.”
Particularly looked down upon at the moment (see the Rocket deal) are so-called leveraged recaps, where P-E sponsors borrow against the companies to pay themselves a big dividend.