At least two energy sector defaults will likely impact the U.S.
institutional leveraged loan space in August, according to Fitch
Ratings. Missed interest payments for Templar Energy and Stallion
Oilfield Services would bring the energy trailing 12-month (TTM) default
rate close to 18%.
The July energy TTM default rate climbs to nearly 14% from June's 11.3%
level following bankruptcies from C&J Energy Services, Atlas Resource
Partners/Atlas Energy and Atinum MidCon I LLC along with a small
distressed debt exchange for FTS International's term loan.
"The impact of commodity price pressures has been the largest driver of
defaults in the leveraged loan market this year," said Eric Rosenthal,
Senior Director of Leveraged Finance. "In fact, nine of the last 10
defaults occurred in the energy space."
August would be the 16th consecutive month for loan defaults involving
an energy or metals/mining company. When those defaults occur, energy
and metals/mining are projected to account for 62% of total defaults on
a volume basis.
Fitch believes the U.S. leveraged loan market is on track for $24
billion of defaults by end-2016, equating to a 2.5% default rate.
Factoring in August's anticipated defaults, there has been $15 billion
of volume. The July TTM default rate stands at 2.2%, below the historic
average of 2.8%.
Fitch's CLO portfolios continue to have manageable exposure to defaults
at just 0.4% on average across 250 CLOs.
The overall leveraged loan market also remains resilient. The secondary
market shrugged off the UK's Brexit referendum while primary activity
picked up due to refinancings.
The full report, "U.S. Leveraged Loan Default Insight: Energy Defaults
Continue in Third Quarter, Secondary Market Shakes off Brexit," is
available at www.fitchratings.com
Additional information is available at 'www.fitchratings.com'.
Related Research
Fitch U.S. Leveraged Loan Default Insight (Energy Defaults Continue in
Third Quarter; Secondary Market Shakes Off Brexit Vote)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885023
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Copyright Business Wire 2016
Source: Business Wire
(July 28, 2016 - 9:53 AM EDT)
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