In late February, I was part of a panel discussion titled Pulse of the Middle Market. Consensus was that all the conditions were ripe for new lending, but that the Q4 surge had for some reason been followed by a Q1 lull.

“We were expecting to see a lot more volume so far this year,” said Tim Conway, chairman and CEO of mid-market lender NewStar Financial. “I don’t really know why, except that maybe everyone was busy closing deals by December 31, and now we’re just waiting for the new transactions to work their way to us.”

I haven’t talked to Tim since then, but chances are he’s been busy. S&P Leveraged Commentary & Data today reported that Q1 volume for syndicated mid-market loans hit their highest level since Q2 2007, thanks to a March surge. First quarter stood at $4.5 billion, compared to $2 billion for the year-earlier period.

The dark cloud here is that 55% of the Q1 volume was either for refinancings (35%) or for dividend recapitalizations (20%). Leveraged buyout fell to 27% of the quarterly tally (from 37% in Q4 10), while other acquisition-related financing rose to 9% from 6%.

Senior debt took the lion’s share of volume, with mezzanine and junior debt taking a back seat. In terms of pricing and multiples, S&P LDC writes:

All-in pricing for LBOs averaged 7% (L+504/1.54% LIBOR floor/98.8 issue price) in the first quarter, down from 7.5% (L+525/1.7% LIBOR floor/98.60 issue price) in the fourth quarter.

Lenders managed to keep a lid on debt multiples, with total leverage slipping to 3.7x, from 3.9x in the fourth quarter. Senior leverage remained the same, at 3.5x. Lenders tightened the strings more aggressively on LBOs. Total leverage for first-quarter buyouts dropped to 3.4x, on average, from 4.1x in the fourth quarter.