- Liability management is reducing recovery rates on loans
- Demand has sent spreads to their tighest level in two years
Companies sold a record volume of leveraged loans last month, taking advantage of the cash chasing credit. A glance at recovery rates for defaults, however, highlights a growing risk in this debt.
For newly issued first-lien debt in the US and Canada in the first quarter, investors could expect to get back less than 35% of their investment when loans sour, compared with 72% from 2018 through 2022, according to a presentation this month by S&P Global Ratings.
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