The tally of U.S. corporate entities drawing upon existing revolving credit lines since March 5 grew by $5.7 billion yesterday as companies continue efforts to shore up liquidity amid the coronavirus crisis.
The RC drawdown total since March 5 — when LCD began tracking this info — is now $160.6 billion, via approximately 260 credit facilities. Historically, these RC lines could go largely undrawn, and might be used for working capital, as a backup line of credit, or for corporate cash emergencies.
Many of these debt issuers have cited in SEC filings the coronavirus as the reason for tapping these lines, along with an "abundance of caution."
Auto makers have been most active here, tapping roughly $32 billion in RC lines, though General Motors Corp. accounts for half of that amount. GM last week said it was taking aggressive steps to preserve liquidity during the coronavirus crisis.
More broadly, Consumer Discretionary concerns account for more than half the drawdowns, followed by Industrial concerns, which are a distant second, at 10% of the drawdowns, according to LCD.
Higher-rated, BBB corporates continue to account for the bulk of the drawdown activity, with lower-rated single-B issuers, and unrated issuers, accounting for 18% of the activity.
These lower-rated issuers are under particular scrutiny now as the specter of downgrades is of considerable concern in the U.S. leveraged loan market because CLOs — by far the largest single investor segment in the $1.2 trillion asset class — have thresholds as to how much CCC rated debt they can hold (usually that's 7.5%).
The RC drawdowns begin to mature in larger numbers in 2022, ramping up sharply in 2023-24.
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