That’s because most issuers seized the opportunity during the second half of 2020 and 2021 to reschedule their debt deadlines. The few that didn’t are looking at alternative ways to address upcoming maturities.
For example, Augusta Sportswear Inc. sold a $347 million loan last week in an ‘amend and extend’ transaction. That pushed out the maturity of its revolving credit facility and term loan by 18 months to April 2025 after the company agreed to pay a hefty increase of 100 basis points on the coupon.
For US leveraged loans, the maturity wall may be more of an obstacle than for junk bonds. The amount of the floating-rate debt maturing in two to three years makes up 14.2% of the market, compared to 6.1% in 2018, according to Barclays Plc data. UBS Group AG strategist Matt Mish, meanwhile, forecast that the default rate for leveraged loans could surge to 9% next year if the Federal Reserve stays on its aggressive monetary-policy path.
Banks are also reluctant to take on risk by underwriting new deals. They are still nursing losses incurred on transactions underwritten before credit markets deteriorated, such as Citrix Systems Inc.
“This is an environment where it behooves management to be prudent, but balanced,” James Gorman, chairman and chief executive officer of Morgan Stanley, said in a call with investors earlier this month. “Our wholesale retreat from the market is not called for, but at the same time, we must be more cautious in credit-sensitive parts of the business.”
Morgan Stanley and its peers across Wall Street and Europe still have about $30 billion of underwritten financing on their balance sheet they need to dispose of.
This article was provided by Bloomberg News.