Private equity firms are racing to beat the fiscal cliff and have increasingly accessed the debt markets this year as readily available capital has allowed them to refinance and recapitalize their portfolio companies, so much so that it’s driving pricing to pre-crisis levels according to Tom Hobbis, managing director and co-head of CIT Sponsor Finance at CIT Group. This is one of the many topics Hobbis covers in “Financing the U.S. Middle Market,” the latest in a series of in-depth executive video Q&As featured in CIT’s Executive Insights video series.

Deals are Getting Done

Hobbis indicates that the market is fairly receptive to good middle market credits, saying: “There’s an active pipeline across a variety of industries so deals are getting done. If there are problems moving deals, changes in pricing or amending structure or upfront fees can get the deal done.”

Leveraging Deals
Stable businesses with recurring revenue streams are attractive because their future performance is easier to predict. “The reason private equity firms put leverage on deals is because it enhances their returns and makes them more profitable,” says Hobbis. “This is critical since private equity firms live from one fund to the next and having better returns makes it more likely they will be able to raise future funds.”

Growing Portfolios and Communities

Private equity firms are always looking to grow their companies and their portfolio businesses. “There's a natural tie into helping these companies grow, and providing financing fuels the engine that drives the small and middle market,” says Hobbis. “There's absolutely a correlation between the success of the middle market companies we finance and the communities in which they’re located.”

Quarterbacking the Deal

CIT Sponsor Finance develops and manages relationships with U.S. middle market private equity firms. Hobbis comments: “We act as quarterbacks for the deal process. We have relationships with private equity firms, we know what they're looking for and we match them up with the right products, services and people.”