Golub Capital issued the second edition of the quarterly Golub Capital Middle Market Report. The report, which features the Golub Capital Altman Index, showed that private middle market companies increased revenues by 7.95% and earnings (defined as earnings before interest, taxes, depreciation and amortization, or "EBITDA") by 3.95% year-over-year during the first two months of the third quarter of 2015. This compared to year-over-year increases of 9.26% and 6.93% in revenues and earnings, respectively, in the second quarter. The full report is available at golubcapital.com/middle-market-report.
Lawrence E. Golub, CEO of Golub Capital, said, "These results show that middle market companies remain a resilient and dynamic driver of growth in the economy. While revenues and earnings in the period grew at a healthy pace, margins continued to be pressured by such factors as rising labor costs and the strength of the U.S. dollar, which is impacting the pricing power of U.S. firms with international competitors. The health care sector saw particularly strong growth as the Affordable Care Act increased access to health care services, and consumer segments benefited from increased spending. The information technology sector saw negative profit growth, reflecting, we believe, greater investment in product development."
Dr. Altman said, "Given the high rate of correlation between our index and the performance of public companies in major stock market indices, we expect to see the theme of slower growth play out this earnings season. Middle market companies have historically outperformed their larger public peers, so we anticipate relatively low year-over-year revenue and especially EBITDA growth from S&P component companies in the third quarter."
The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman, is the first and only index based on actual sales and earnings data for middle market companies. It measures median revenue and earnings performance from the data of approximately 150 private U.S. companies in the loan portfolio of Golub Capital, a leading middle market lender. Reported shortly before public company quarterly earnings season, the index has served as a reliable indicator of the overall growth rates in revenue and earnings of public companies in market indexes such as the S&P 500 and S&P SmallCap 600, as well as quarterly Gross Domestic Product ("GDP"), according to statistical back-testing dating back to 2012, when data began to be tracked.
The results (1) are representative of the general performance of middle market companies, which are a major contributor to U.S. private sector employment, (2) can be easily compared to the performance of the public companies that make up major stock indexes, (3) are relevant to the aggregate economic performance of the U.S. economy, and (4) provide timely information for the investment community.
Importantly, the size and diversity of the Golub Capital loan portfolio ensures that the confidentiality of all company-specific information used in the report is maintained in both the aggregate and industry segment data.
The companies in the Golub Capital AItman Index operate in a wide range of industries, and aggregate results are provided for the total universe and by industry segment. Given the index's limited exposure to Financials, Utilities, Energy and Materials, calculations are made for the public indexes both including and excluding these sectors (for the latter, see charts marked "S&P 500 Adjusted" and "S&P 600 Adjusted").
The Golub Capital Middle Market Report analyzes the results of the Golub Capital Altman Index, which measures the median revenue and earnings growth of approximately 150 privately owned companies in the Golub Capital loan portfolio for the first two months of each calendar quarter. It compares these results to the financial performance of public companies in well-known market indexes, including the S&P 500 and S&P SmallCap 600, as well as the quarterly Gross Domestic Product. The index is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman.
Golub Capital's award winning middle-market lending team structures financing solutions with hold positions of up to $300 million. The team also underwrites and syndicates senior credit facilities and a proprietary suite of GOLD (one-loan debt) facilities, up to $500 million. Golub Capital has been a top 3 U.S. Middle Market Bookrunner each year from 2008 through Q2 2015 for senior secured loans of up to $500 million for leveraged buyouts (according to Thomson Reuters LPC and internal data; based on number of deals).
A leading expert on credit markets, Dr. Edward I. Altman is the Max L. Heine Professor of Finance, Emeritus at the NYU Stern School of Business, and Director of Research in Credit and Debt Markets at the NYU Salomon Center for the Study of Financial Institutions. He is currently an advisor to several foreign central banks.