General market unease in the first fiscal quarter of 2023 was evident. The back-to-back collapse of two regional banks spooked investors and the effects of two federal rate increases rippled through the market. Uncertainty in investor confidence resulted in lower new money deal flow and the tightening of terms across both new and existing credits. However, in the few trophy credits to hit the market, the competitive auction saw widespread participation across the direct lending market.

As we enter Q2 and wrap up the first half of 2023, new deal flow is expected to remain stagnant. This stagnation is driven in part by continued mismatch in valuation. However, we expect an increase in the number of amendments of existing credits in lender portfolios as a result of financial audits due in May, the LIBOR sunset in June, and the general cooling of the refinancing market.