Leveraged loan prices have come under pressure this year on growth concerns, equity volatility and struggles in the energy market. But is it as bad as many believe?
Price divergence: The S&P/LSTA 100 Price index only tracks the largest loans, and it has been dragged down by issues like TXU and Clear Channel. Prices in the broader universe (more than 1,300 loans) appear to have held up.
Smoother ride: Volatility in leveraged loans has been lower than other fixed-income categories.
Mixed outlook: Higher leverage multiples, more “covenant-lite” deals and energy defaults spur concerns about market fundamentals. But coverage ratios are above historical levels.
Energy opportunity? Bruce Richards, CEO of Marathon Asset Management, recently said he expects about a quarter of oil and gas issuers to restructure. Being senior in the capital structure will be key, he said — and owning the bank debt will be like holding the fulcrum.
*As of Nov. 20. Sources: Bloomberg; Guggenheim Investments; Loan Syndications & Trading Association
Compiled and designed by Timothy Pollard and Gregg A. Runburg