Leveraged Loan Default Rate Dips Again After Third Straight Blemish-Free Month

leveraged loan defaults

For a third consecutive month there were no new defaults among constituents of the S&P/LSTA Leveraged Loan Index. Consequently, the default rate fell to a 10-month low of 1.81% in September, from 1.99% in August.

Though the rate has declined significantly from the three-year high of 2.42% at the end of March, it remains well inside the 3% historical average where, as detailed below in LCD’s quarterly default survey of loan portfolio managers, it is expected to stay for a couple more years.

By issuer count, the default rate fell to 1.59%, down from 1.71% at the end of August.

This marks the first three-month default-free streak in the Index since August 2014, though some potential situations loom.

The well-flagged 30-day grace period on American Tire’s missed Sept. 1 interest payment, for one, is set to expire at the end of September. Tweddle Group, meanwhile, is said to be negotiating a deal to equitize its term loans.

Other Index issuers whose debt is trading in technical distress include American Commercial LinesCaelus EnergyCatalina MarketingEmpire Generating Co.Longview PowerDavid’s BridalFullBeauty BrandsCrossMarkPetcoPhillips Pet Food & SuppliesCTI FoodsDixie ElectricAcademy LtdAcosta, and Revlon, among others. – Staff reports

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