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Another Default-Free Month in US Leveraged Loan Market. However …

US leveraged loan default rate

There were no defaults among issuers included in the S&P/LSTA Leveraged Loan Index in August. As such, the U.S leveraged loan default rate for a second consecutive month remained at 1.36%, a 19-month low (there were no defaults in July, either).

The stubbornly low default rate might confound market bears who say we must be nearing the end of the current credit cycle, now chugging along in its ninth year. Portfolio managers say, however, that the U.S. default rate could remain below historical norms until 2019, according to LCD’s latest market survey (conducted at the end of the second quarter).

On the other hand, the default-free run could well end soon, with several restructuring situations currently playing out. In aggregate, these have the potential to propel the loan default rate to double its current level. These issuers include iHeart Media, Pacific Drilling, Walter Investments, and Seadrill. – Staff reports

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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