KBRA Releases Research - Structured Credit Trend Watch: Against the Wind
KBRA releases a report examining trends across the structured credit landscape, including issuance, spreads, notable structures, and document features. After a slow start to 2022, issuance volumes for broadly syndicated loan (BSL) collateralized loan obligations (CLO) are catching up with levels seen on a year-over-year (YoY) basis. As mentioned in KBRA's structured credit sector outlook in 2022, the market has shown resilience to headwinds including inflation, supply chain disruptions, decelerating global economic growth, fading government stimulus, and the LIBOR/SOFR transition. However, the broader economy and corporate profits are beginning to experience the impact of cost increases that are the highest in four decades. As the Federal Reserve continues to signal more aggressive countermeasures, the fear of a recession is becoming more palpable.
Moreover, the impact of Russia's invasion of Ukraine has largely been negligible or indirect from a U.S. corporate credit perspective. For European CLOs, despite only a marginal direct expsure to issuers with operations or portions of their revenues generated in the conflict zone or in sanctioned countries, the fallout from the conflict are being felt in the form of rising input costs, deterioration of broad commercial activity, and a decline in risk-taking sentiment.
In addition to the trends noted above, we discuss the middle market sector and provide a recap of KBRA's rating and surveillance activity in 2022.
Click here to view the report.
KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.