Equity sponsor deals, where banks are generally brought in more as liquidity providers than anything else, have a real downside for secured lenders. Said Chadwick: “Clearly over the last several years, the process by which the sponsored loans have been managed has changed. For a long time in leveraged buyouts, the relationship between sponsors and money market lenders was symbiotic. Now, sponsors have decided to cut bait on some of their portfolio companies, the relationship with their lender be damned.”

Lenders are left holding the bag—having to fund the ultimate outcome for that credit. Lenders are under pressure not to do the leveraged loans. That relationship is not the same as it was 10 years ago, when money market banks would rely on the sponsors for a pipeline of work. Said Miller: “Sponsors are under stress themselves, having to raise new funds. It’s a tough world out there, even for sponsors.”