Fitch Ratings: No U.S. Leveraged Loans Defaults for Two Consecutive Months.
New York: There have been no U.S. institutional leveraged loan defaults thus far in September, potentially marking the second consecutive month with none - a first since fall 2014, according to a new Fitch Ratings report.
"Fewer retail defaults will likely push the loan default rate down to 2% at year end, below Fitch's forecasted 2.5%. Total 2018 retail defaults will be closer to $3.5 billion, a drop from the originally forecasted $7 billion," said Eric Rosenthal Senior Director of Leveraged Finance. "The strong U.S. economy has aided retail, as evidenced by a handful of names being removed from Fitch's Top Loans of Concern."
American Tire Distributors Inc. is in a 30-day grace period for an interest payment that was due on Sept. 1 and could file for bankruptcy before the end of September.
The September TTM institutional leveraged loan default rate should fall to 2.2% from 2.3% in August. Roughly $7 billion of defaults are projected for the remainder of the year. Retail comprises 40% of these potential defaults, with FULLBEAUTY Brands Inc. and David's Bridal Inc. imminent. Sears Holdings Corp. received a proposal that would restructure its balance sheet to avoid bankruptcy from its shareowner, ESL Investment Inc. Fitch would view a transaction on the proposed terms as a distressed debt exchange.
The September TTM large middle market default rate is 1.2%, below the 2.3% broadly syndicated loan level. Large defaults for iHeartCommunications Inc. and Fieldwood Energy LLC added 0.9% to the BSL rate.
Total outstandings on the Top Loans of Concern has remained between $19 billion and $20 billion over the past three months, with no September additions. Fitch's Tier 2 Loans of Concern fell to $55 billion from $58 billion in August with a few names showing improved prospects.
The loan universe grew nearly $13 billion in August, pushing the institutional market size to $1.28 trillion. Opportunistic refinancing and repricing activity made up a relatively small share of issuance, roughly 25%, in contrast to nearly 70% over recent years.
The full report titled "U.S. Leveraged Loan Default Insight Report: Loan Default Rate Poised to Finish 2018 Below 2.5% Forecast; No September Defaults Yet" is available at www.fitchratings.com.