The U.S. leveraged loan market has started to rebound in February and March of 2019 due, in part, to light supply and improving technical conditions.
The percentage of loans trading above par is at the highest level since the end of November 2018.
In addition, interest rate spreads, while still higher than the spreads seen during the first half of 2018, have started to come down from the peak reached in December 2018. Roughly 80% of volume year-to-date has priced at the lower end of price talk, compared to December when roughly 90% of volume priced at the higher end of price talk.
With respect to terms, deals with leverage levels above 6x have continued to increase thus far in the first quarter.
We have also seen a gradual resurgence in borrower-friendly terms, including increases in the number of deals with MFN sunsets, fewer caps on EBITDA adjustments and uptick in general basket capacity.
Market participants expect that, while the U.S. leveraged loan market remains selective, more balanced conditions will continue to take hold.
“Volume has been muted on the loan market, giving borrowers a bit of power despite 14 consecutive weeks of outflows and limited CLO formation.”
– GoldSheets, Thompson Reuters LPC, February 25, 2019