BDO Capital Debt Market Update

June 2020


According to the National Bureau of Economic Research, the U.S. is officially in a recession, yet it may be brief given recent signs of job growth and a pickup in economic activities from the reopening of various states and municipalities. To ensure there is adequate liquidity to support an economic recovery, the Federal Reserve (Fed) is committed to holding its benchmark interest rate near zero through 2022 as well as to a continued increase in its bond holdings. These actions by the Fed have helped spur the recent run-up in the capital markets, but additional measures will be needed to address the fundamental issues underlying the economy in the form of another economic relief package as well as a potential $1 trillion infrastructure program contemplated by the government.

While debt market conditions and availability are showing signs of improvement, pricing and leverage has significantly tightened compared to pre-COVID days. Most lenders have moved past a survival mindset focused on remediating existing portfolio clients to actively seeking new business. Further, the market is becoming increasingly accustomed to a virtual deal process that involves reviewing, processing, due diligencing, documenting, and closing transactions without in-person meetings.