Fitch: Energy, Metals/Mining Defaults Hit Leveraged Loans

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December 23, 2024

NEW YORK–(BUSINESS WIRE)–

The institutional leveraged loan market saw 11 defaults in 1H15, with five attributed to the energy and metals/mining sectors, according to Fitch Ratings. Walter Energy’s filing and a potential August bankruptcy by Alpha Natural Resources would add two to the tally and $ 1.6 billion of additional volume before the end of the summer.

The energy and metals/mining sectors comprised just 7% of outstanding leveraged loans at 1H15 compared with 23% of outstanding high yield bonds.

‘Walter and Alpha affect the default rate for both loans and bonds, but the lower loan exposure of energy, metals/mining has this year’s overall rate heading toward 1.5%-2% for loans versus 2.5%-3% for bonds,’ said Eric Rosenthal, Senior Director of Leveraged Finance.

In addition, there are a handful of companies that could default before the end of the year and have over $ 1 billion of outstandings in institutional loans in a few sectors, including energy.

At end-June 2015, the institutional leveraged loan market stood at $ 916 billion. The year-to-date default rate was 1%, in line with Fitch’s estimate of 1.5%-2% by year-end.

On a trailing 12-month (TTM) basis, the leveraged loan default rate at end-June was 1.4%. For energy alone, the TTM rate was 3.5%, while the metals/mining sector came in at 4.5%.

The gaming sector continues to top the charts for leveraged loan default volumes with a TTM rate of 12.2% due to Caesars Entertainment Opco’s January bankruptcy.

The full report, ‘U.S. Leveraged Loan Default Insight: TTM Loan Default Rate at 1.4%, Tracking at 1.5%-2% for 2015,’ is available at www.fitchratings.com.

Additional information is available at ‘www.fitchratings.com’.

Fitch U.S. Leveraged Loan Default Insight (TTM Loan Default Rate 1.4%, Tracking Toward 1.5%-2%)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868721

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