With four issuers filing for bankruptcy protection in November —Pacific Drilling, ExGen Texas Power, Cumulus Media, and Walter Investment Management—the default rate of the S&P/LSTA Leveraged Loan Index jumped to a 13-month high of 1.95%, from 1.51% at the end of October.
The rate has climbed steadily from an 18-month low of 1.36% at the end of July, but remains well inside the high of 2.17% in July 2016. By number of issuers, the default rate has increased to a 10-month high of 1.72%, from 1.41% in October.
While the rate climbed noticeably last month, loan market players remain relatively sanguine regarding defaults, and the credit cycle in general. Per LCD’s survey of North American portfolio managers and buyside players, the U.S. leveraged loan default rate likely won’t hit its historical average of 3.1% in 2019.
This quarterly survey was conducted in late September. It will be interesting to see if market players adjust their expectations for the next survey, which LCD will publish before year-end. – Rachelle Kakouris
LCD comps is 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.