Fitch: Energy, Metals/Mining Dominate 2016 U.S. Leveraged Loan Defaults

NEW YORK--(BUSINESS WIRE)-- The energy and metals/mining sectors still account for 48% ($10.1 billion) of defaults in the U.S. institutional leveraged loan universe this year despite Dex Media Inc. and Fairway Markets filing for bankruptcy in May, according to Fitch Ratings.

"While Dex Media's $2.1 billion loan comprised the largest loan default since January 2015, energy and metals/mining still drive the overall volume," said Eric Rosenthal, Senior Director of Leveraged Finance.

Metals/mining concern Atlas Iron also defaulted in May due to a distressed debt exchange, continuing a pattern of at least one energy or metals/mining default for the past 13 months.

While inching up, leveraged loan defaults remain below the 2.8% long term average. The U.S. leveraged loan market has seen $18.5 billion of defaults on a trailing-12 month (TTM) basis. May's TTM rate rose to 2% from April's 1.8% mark.

Low commodity prices will continue to have an impact on secondary market bid levels, even as some borrowers complete restructuring and begin to emerge from bankruptcy with lower leverage. Fitch believes the pre-petition term loan bid price at emergence for companies will remain well below the total term loan market average. The TTM bid price for the few companies emerging from bankruptcy was just 29% -- well below the 72% historic average.

Commodity price-related stress coupled with strong refinancing activities over the past few years has reined in new institutional loan issuance, which is down 17% in the first four months of 2016 relative to the year prior. However, activity has picked up recently, with more than $20 billion of new issuance expected shortly.

The full report, "U.S. Leveraged Loan Default Insight: Dex Media's Bankruptcy Boosts Institutional Leveraged Loan Default Rate to 2%," is available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Fitch U.S. Leveraged Loan Default Insight (Dex Media￢ﾀﾙs Bankruptcy Boosts Institutional Leveraged Loan Default Rate to 2%)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882032

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160526005871/en/

Fitch Ratings
Eric Rosenthal
Senior Director
Leveraged Finance
+1-212-908-0286
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Michael Paladino, CFA
Managing Director
Leveraged Finance
+1-212-908-9113
or
Sharon Bonelli
Senior Director
Leveraged Finance
+1-212-908-0581
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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