US Loan Market Struggles in 2022 Despite Q4 Stability
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The US loan market saw a disappointing year due to economic headwinds and negative credit rating migration, leading to lower M&A activity and slow new loan creation.
While Q4 showed stability, with some increase in loan issuance, it favored stronger performing loan issuers, leaving smaller borrowers and those with higher leverage profiles turning to private lenders. Large cap M&A and LBO activity idled due to a considerable backlog of underwritings from early 2022, resulting in refinancing of near-term debt maturities by stronger BB-rated issuers dominating the Q4 issuance activity. Amend-and-extend loan activity also increased but only for better performing issuers. The market saw a clear demarcation in secondary loan trading prices, reflecting a flight to quality or low tolerance for missed budgets or credit rating downgrades. The new loan issuance ticked higher in Q4 2022 but was still the second-lowest quarterly total recorded in the past decade.
