Faced with an intensely competitive environment characterized by tightening spreads and demand for covenant-lite loans, private debt investors in the middle market have been confronting a deluge of institutional capital that is putting pressure on margins.

Year-to-date middle market institutional issuance including deals still in process has reached $18.08bn, already surpassing the $10.67bn booked in the first half of last year, Reuters LPC reports.

"Without a significant supply of new money deals in which to invest as repayments accelerate, investors are forced to decide whether to chase the market down, holding onto assets they like, or to be taken out by the institutional market and hopefully earning favorable prepayment fees," Reuters Leela Parker Deo and Jonathan Schwarzberg write.

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