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Fastest declines and downgrades in leveraged loans since 2008
admin | March 13, 2020
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.
Coronavirus and oil concerns have sent the leveraged loan market into some of its worst days since 2008. Three of the worst daily returns on the S&P/LSTA Leveraged Loan Index since October 2008 have occurred between February 28 and March 9, 2020. The return on March 9 is the second worst return since the start of the index on March 31, 2007. The share of US leveraged loans priced at par or premium has plunged precipitously from 60.8% on January 17 to 0.46% on March 9. Meanwhile, the share of ‘B-’ loans reached 14.75% on February 28, double the share in February 2018. The yearly ratio of downgrades to upgrades in the index also rose to 3.4x in February, the highest since October 2008. CLOs holding ‘B-’ loans now face higher risks of breaching the 7.5% ‘CCC’ bucket limit. The S&P articles are here and here.
Sources: S&P, APS
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