Fitch's Loans of Concern List Led by Energy Firms
"If oil prices remain at current levels - below the breakeven point for many E&Ps - concerns will continue to center on energy loans," said Eric Rosenthal, Senior Director of Leveraged Finance.
Sponsored companies account for 61% of Fitch's list on a volume basis and 66% on an issuer basis. These figures are in line with the broader market and shows that there is no overweighting for sponsors in Fitch's Loans of Concern list. Several energy-focused sponsors have more than one loan on the list.
KKR, TPG Capital and Bain Capital Partners are among the most active sponsors of borrowers in the leveraged loan market overall, each with portfolio company term loan outstandings of more than $30 billion.
The institutional leveraged loan market currently stands at $944 billion. Energy continues to have an outsize impact on default rates, accounting for nine of the last 10 loan defaults. The sector also continues to hamper bids in the secondary market, despite a 10 bps improvement to the average first-lien bids over the past several weeks. Average secondary first-lien bids rose to 96 versus 97 without energy and metals/mining loans.
Five loans totaling $2.1 billion defaulted in July, bringing the trailing 12-month leveraged loan default rate to 2.1%. That rate is likely to rise to 2.2% by end-August given Templar Energy and Stallion Oilfield Holdings' missed interest payments. Fitch is forecasting a 2.5% year-end default rate.