Fitch Ratings' Loans of Concern list, a ledger of companies the agency
considers to have material, near-term default risks, is heavily
represented by energy firms at 49% while the sector accounts for only 4%
of the overall institutional leveraged loan market. There are 53
companies on the list as of yesterday.
"If oil prices remain at current levels - below the breakeven point for
many E&Ps - concerns will continue to center on energy loans," said Eric
Rosenthal, Senior Director of Leveraged Finance.
Sponsored companies account for 61% of Fitch's list on a volume basis
and 66% on an issuer basis. These figures are in line with the broader
market and shows that there is no overweighting for sponsors in Fitch's
Loans of Concern list. Several energy-focused sponsors have more than
one loan on the list.
KKR, TPG Capital and Bain Capital Partners are among the most active
sponsors of borrowers in the leveraged loan market overall, each with
portfolio company term loan outstandings of more than $30 billion.
The institutional leveraged loan market currently stands at $944
billion. Energy continues to have an outsize impact on default rates,
accounting for nine of the last 10 loan defaults. The sector also
continues to hamper bids in the secondary market, despite a 10 bps
improvement to the average first-lien bids over the past several weeks.
Average secondary first-lien bids rose to 96 versus 97 without energy
and metals/mining loans.
Five loans totaling $2.1 billion defaulted in July, bringing the
trailing 12-month leveraged loan default rate to 2.1%. That rate is
likely to rise to 2.2% by end-August given Templar Energy and Stallion
Oilfield Holdings' missed interest payments. Fitch is forecasting a 2.5%
year-end default rate.
The full report, 'U.S. Leveraged Loan Default Insight: Energy Looms
Large Among Fitch's Loans of Concern,' is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Related Research
Fitch U.S. Leveraged Loan Default Insight (Energy Looms Large Among
Fitch's Loans of Concern)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886362
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Copyright Business Wire 2016
Source: Business Wire
(August 18, 2016 - 12:27 PM EDT)
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