Fitch: Institutional Leveraged Loan Defaults Stabilize
OREANDA-NEWS. The trailing 12-month (TTM) institutional leveraged loan default rate remains at 2% so far in June with only one default to date, says Fitch Ratings.
Despite June's default slowdown, Seventy Seven Operating LLC's filing marks the 14th consecutive month with an energy or metals/mining default. The TTM leveraged loan default rate for those two sectors alone is now over 16%.
"After a rocky start to the year, it looks like the leveraged loan market might finally be turning the corner," said Eric Rosenthal, Senior Director of Leveraged Finance. "The default rate is stabilizing, the secondary market is firming, and issuance has moderately picked up since the end of the first quarter."
Post-default prices haven't fully normalized though. The 30-day TTM post-default price on overall first lien loans is 38% of par. While energy and metals/mining drag down the results, there are other issuers with deeply discounted loans, notably yellow pages company Dex Media Inc. and retailer Sports Authority Inc.
Fitch's CLO portfolio continues to be insulated, with 57 of 239 CLOs unexposed. The remaining 182 CLOs had an average of 1.2% of the portfolio defaulted.
Going forward, Fitch will include a list of leveraged loan issuers deemed 'of concern' in its monthly Leveraged Loan Default Insight report. In the inaugural edition, energy and metals/mining accounted for 32 of the 53 issuers listed.
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