S&P: Leveraged Loan Defaults Keep Rising
Standard & Poor’s has released new data confirming what we already knew anecdotally: Leveraged loan defaults are on the rise. Like a rocket: “For U.S. leveraged loans, the 12-month-trailing default rate (based on the number of loans) increased to a 57-month high of 4.35% in December from 3.32% in September and 0.26% 12 months earlier, according to Standard & Poor’s Leveraged Commentary and Data group. The leveraged loan default rate has increased markedly and is now above its historical average of 3%. The loan distress ratio—defined as the percent of performing loans trading below 80 cents on the dollar—catapulted up to 87.5% at the end of December from 78.9% in September and 13.4% a year ago.” The report does not estimate 2009 leveraged loan default levels, but does predict that overall default rates will continue to increase. What this basically means
