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Fitch Ratings US LevLoan Chart Book: New Money Lending Holds Up in Q3.

New York: New-money transactions made up a significant portion of U.S. institutional leveraged loan volume in third-quarter 2018, with total activity sharply lower on fewer repricings and refinancings, according to Fitch Ratings' latest U.S. Leveraged Loan Chart Book. These results mirror pre-crisis levels, when new money deals constituted the bulk of volume coming to the market.

Refinancings and repricings contributed $23 billion to the institutional loan activity in the third quarter, down from $166 billion last quarter, data from Refinitiv LPC shows. New-money loan activity also eased but not by as much; it was $80 billion in Q3, down from $84 billion in Q2.

The significant new-money amount observed so far in 2018 of $246 billion, or 42% of the total U.S. institutional leveraged loan volume, surpassed the year-to-date 2017 amount and supported an uptick in average first-lien loan spreads in the quarter.

Leverage metrics increased to support higher valuations during the quarter. The average debt multiples on leveraged buyout (LBO) transactions for both broadly syndicated loan (BSL) and middle market (MM) deals were 6.6x and 6.4x EBITDA, respectively. First-lien leverage in BSL LBOs increased to 5.6x EBITDA in the third quarter after being stable at 5.0x for three quarters in a row.

Overall credit quality for U.S. corporate issuers covered by Fitch was stable at the end of September 2018. Most U.S. corporate ratings and Credit Opinions have been affirmed or updated at the same level so far this year. For credits that did see changes, there were more negative than positive movements in the first nine months of 2018. Third-quarter downgrades included media and entertainment company NEP Group to 'B' ( and retailer J.C. Penney to 'B' (

The September TTM institutional leveraged loan default rate was 2.2%, down from 2.5% at the end of June and 2.4% for the full-year 2017. Fitch forecasts a benign 1.5% default rate for 2019, its lowest level since 2011. The only issuer default in the third quarter was for Washington Inventory, which filed for bankruptcy in July.

Fitch's Chart Book provides succinct commentary on evolving trends in the U.S. leveraged market covering topics in new issuance, outstanding loans, and default and recovery.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Jan 16, 2019
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