Why Leveraged Loans Could Be the Next to Fall in Credit

The video discusses the current state of the market, highlighting the stability of certain sectors and emerging cracks in others. It focuses on the impact of leverage loans and high yield credit, with investor nervousness growing. The threat of a pandemic exacerbates concerns about high yield debt and potential downgrades. Leveraged loan fears are particularly pronounced in energy bonds due to falling oil prices and covenant light structures. Investors are cautious, evaluating their portfolios carefully. Market volatility has led to delays in new deals, with issuers like Bausch postponing refinancing plans.

What is a primary concern for investors in the leveraged loan market?

• Lack of market liquidity

• Increased difficulty in making interest payments

• High interest rates

• Rising inflation

What was a concern about high yield debt even before the pandemic threat?

• Rising interest rates

• Decreasing demand for loans

• Increased government regulations

• Potential downgrades on the leverage side

Which sector is particularly affected by leveraged loan fears?

• Technology

• Healthcare

• Energy

• Retail

What is a significant fear associated with covenant light structures in leveraged loans?

• Higher interest rates

• Lower recoveries

• Increased competition

• Stricter regulations

Why did Bausch decide to delay its refinancing package?

• Lack of investor interest

• Market volatility

• Regulatory issues

• High refinancing costs