In addition, we provide additional descriptive statistics including: (a) loan-to-value; (b) the impact of interest rate (SOFR) and credit changes (spread) on total return; (c) default rates; and (d) historical yields by EBITDA size and by industry.

The U.S. non-investment grade corporate loan market has two segments: the BSL market, which attracts investors investing in broadly syndicated deals, and the direct lending market for investors investing in club deals. While correlated, there are subtle but significant differences between the two markets. Both markets primarily provide floating rate loans; however, divergences exist in terms of market liquidity, company size and credit facility size. Given the greater liquidity in the BSL market, pricing and terms are a function of the technical market and competitive factors, whereas the more illiquid direct lending market has a stronger orientation to assessing company fundamentals.

In contrast to the Morningstar LSTA U.S. Leveraged Loan 100 Index (Morningstar LSTA) which is comprised of companies borrowing in the BSL market, the constituents in the Senior Debt Index are virtually all companies borrowing in the direct lending market.

The direct lending market is a significant source of capital to private equity-backed middlemarket companies. The Lincoln U.S. Senior Debt Index benefits market participants by providing information to facilitate a greater understanding of the attributes of this important source of capital to the private sector.

How We Obtain the Information

On a quarterly basis, Lincoln values more than 6,250 private companies primarily owned by more than 225 alternative investment funds and lenders to funds. Most of these companies are levered via borrowings from the direct lending market. A significant percentage of the Senior Debt Index constituents are based upon valuations of loans provided for non-public BDCs and other private investment vehicles and, therefore, not disclosed in public filings.

For many of the private companies valued quarterly, Lincoln advises on the fair value of at least one senior debt security in the capital structure. All valuations conform with Generally Accepted Accounting Principles (GAAP) and fair value principles and have been reviewed by fund management, fund boards, limited partners and auditors.

Additional information can be found in our methodology discussion and on our website.

IMPORTANT DISCLOSURE: The Lincoln Senior Debt Index is an informational indicator only, and does not constitute investment advice or an offer to sell or a solicitation to buy any security. It is not possible to directly invest in the Lincoln Senior Debt Index. Some of the statements above contain opinions based upon certain assumptions regarding the data used to create the Lincoln Senior Debt Index, and these opinions and assumptions may prove incorrect. Actual results could vary materially from those implied or expressed in such statements for any reason. The Lincoln Senior Debt Index has been created on the basis of information provided by third-party sources that are believed to be reliable, but Lincoln International has not conducted an independent verification of such information. Lincoln International makes no warranty or representation as to the accuracy or completeness of such third-party information.

The LSDI should not be construed as an offer to sell or buy, or a solicitation to sell or buy, any products linked to the performance of the LSDI. The use of the LSDI in any manner, including for benchmarking purposes, is not endorsed or recommended by Lincoln International and Lincoln International is not responsible for any use made of the LSDI. Lincoln International does not guarantee the accuracy and/or completeness of the LSDI and Lincoln International shall not have any liability for any errors or omissions therein. None of Lincoln International, any of its affiliates or subsidiaries, nor any of its directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the LSDI and any use to which any person may put the LSDI. Lincoln International has no obligation to update the LSDI and has no obligation to investors with respect to any product based on the performance of the LSDI. Any investment in such a product will not acquire an interest in the LSDI. Lincoln International is not an investment adviser and will not provide any financial advice relating to a product linked to the performance of the LSDI. Investors should read any such product offering documentation and consult with their own legal, financial and tax advisors before investing in any such product.

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