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Loan Defaults Fall Below 4%, Lowest Level Since June 2020, Fitch Ratings

March 24, 2021, 08:00 AM
Filed Under: Industry News

The March trailing 12-month institutional leveraged loan default rate stands at 3.9%, according to a new Fitch Ratings report.

"The current 2021 forecast is 4.5%, but if market access remains as open and issuer-friendly as it has been, the rate will probably finish even lower," said Eric Rosenthal Senior Director of Leveraged Finance.

There have been zero defaults this month, which has not happened since August 2018. Year-to-date volume tallies just $3.3 billion, down 71% compared to March last year, with nearly half the volume from Belk.

The retail default rate is projected to end the year at roughly 15%, but that could come in closer to 10% in the current refinancing environment. This sector has the most issuers on the Top Market Concern Loans list, with the vast majority being large middle market companies.

The forecasted year-end energy rate is 8% based on defaults impacting smaller issuers compared with last year. Crude oil prices reaching $65 per barrel has also helped the sector.

Fitch's Top Market Concern Loans total $38.6 billion, well off the $69.4 billion April 2020 peak. This is the lowest tally since July 2019. The total outstanding on Fitch's Tier 2 Market Concern Loans decreased too, reflecting improvements/refinancings/acquisitions. The combined Top and Tier 2 Market Concern Loans amount fell for the 11th straight month and is off 20% from the April 2020 high.

February saw a record gross issuance of $121 billion. Issuers continue to refinance their existing loans, with around 70% of the gross issuance being repricing/refinancing/maturity extension transactions.

In April, Fitch will begin publishing the U.S. Leveraged Finance Market Insight report, which will have market statistics previously published in the U.S. High Yield and U.S. Leveraged Loan Default Insight reports. In addition, Fitch has changed the nomenclature of the previously known as the Top Loans of Concern and the Tier 2 Loans of Concern. This will now be referred to as the Top Market Concern Loans and Tier 2 Market Concern Loans.

The full report titled "U.S. Leveraged Loan Default Insight Report: TTM Default Rate Falls Below 4%, Lowest Level Since June 2020" is available at

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