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KBRA Releases Structured Credit Research: Par Wars: Attack on the LoansKroll Bond Rating Agency (KBRA) releases a research report highlighting general trends in the leveraged loan market, including credit fundamentals and documentation. The report highlights the impact deteriorating loan standards could have on collateralized loan obligations (CLOs). The market for leveraged loans recently surpassed the trillion-dollar mark. However, growth in loan issuance has only recently caught up with the collateralized loan obligation market. Demand for floating-rate CLO paper is rampant, with record first-half issuance, as investors see glimpses of the later stages of a 10-year economic expansion and expect further Fed rate increases this year. But to what extent has this historic demand influenced the quality of the supply? What is the state of loan standards and covenants? Are investors making headway on aggressively structured deals? What impact could loan collateral developments have on CLO liabilities? KBRA is thinking about these questions and other related topics as we expand our rating opinions into other asset classes, including CLOs, the largest buyers of leveraged loans today. As the market digests the regulators latest public interpretations on leveraged lending guidance, trends in leverage levels and loan structures are coming into focus. EBITDA add-backs, credit migration, and defaults continue to be hotly discussed topics and potential areas of concern. When viewed in tandem, price and credit ratings can be a useful gauge of market sentiment over time. The covenant-lite phenomenon continues to be a force to be reckoned with, both in the broadly syndicated space and increasingly in the upper middle-market. Finally, there are signs of hope that perhaps a few of these trends are reversing course. At KBRA, we believe it is important to consider as much available information as possible. As such, we will continue to monitor these trends, amongst others, when forming a credit opinion on CLOs and their underlying obligors. Related Publications: (available at www.kbra.com)
Twitter About KBRA and KBRA Europe KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. View source version on businesswire.com: https://www.businesswire.com/news/home/20180920005874/en/ |
