Middle Market Debt Week Highlights Tightening Spreads and Strategic Refinancing

The middle market debt landscape this week reflected tightening spreads and shifting lender priorities amid a complex macroeconomic backdrop. Power Solutions International secured a $220 million asset-based lending (ABL) facility at SOFR plus 180 basis points, replacing a smaller $135 million line priced at SOFR plus 260. Meanwhile, Itafos extended its ABL to 2029 and upsized its term loan to $140 million, cutting the margin by 75 basis points.

At the opposite end of the credit spectrum, Leslie’s, Inc. filed for Chapter 11 bankruptcy, with existing ABL lenders committing a $225 million DIP ABL. This highlights the critical role of first-lien revolvers in the capital structure, even as $685 million of term debt is erased.

The Federal Reserve raised its target range to 3.75%, 4.00% on September 16, and the 10-year Treasury yield hovered near 5.3%. This environment of high base rates and softening labor data underscores the importance of borrowing-base discipline and collateral quality for middle market borrowers and lenders.

Notable deals included Hut 8’s $1.07 billion secured revolver at SOFR plus 175 and Agfa-Gevaert’s extension of its €180 million facility, both showcasing banks’ willingness to lend against specific collateral. Orbit International refinanced its ABL with Merchant Financial, paired with an equity raise, illustrating lower-middle-market dynamics.