NEW YORK--(BUSINESS WIRE)--One year after Energy Future Holdings filed for bankruptcy, the U.S. institutional leveraged loan default rate is at its lowest point since the event occurred, according to Fitch Ratings. At end-April 2015, the trailing 12-month (TTM) rate stood at 1.4%, well below the 3% historical average. Before Energy Future Holdings' $19.2 billion in loans exited the TTM index, the default rate stood at 3.6%.
'Barring any new large defaults, Caesars would be the next behemoth to exit the TTM universe,' says Eric Rosenthal, Senior Director of Leveraged Finance. 'When their $5.4 billion of loans move out next January, the TTM default rate would see another dip.'
This year U.S. institutional leveraged loan new issuance had its slowest start since 2010. The $61 billion tallied in 2015 through end-April represents a 72% drop from the same period a year earlier. When coupled with strong demand from CLO buyers, secondary market prices have seen upward pressure.
With $903 billion outstanding at end-April, the institutional leveraged loan market has been mostly flat since the beginning of the year but is up 13% since April 2014. The beleaguered energy and metals/mining sectors combined comprise only 7% of the market, compared to 23% in the $1.45 trillion high yield bond universe.
Despite stagnation in issuance, sizes of refinancings are up, averaging $659 million versus $541 million for the prior average facility amount. The trend is also evident in the total deal commitment amount, with the 2015 executed loans averaging $964 billion versus $867 billion for the previous loans that were refinanced.
Covenant-lite facilities currently comprise 58% of the universe. However, their rise has slowed in the past two months, as a number of facilities with covenants accessed the market to reprice and remain covenanted. In the first four months of the year, cov-lite facilities only comprised 45% of new issuance.
The full report, 'U.S. Leveraged Loan Default Insight: Loan Default Rate Falls to 1.4%; 2015 Issuance Remains Light,' is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Fitch U.S. Leveraged Loan Default Insight (Loan Default Rate Falls to 1.4%; 2015 Issuance Remains Light)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866093
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