The U.S. leveraged loan market made headlines recently when it officially became a $1 trillion asset class, buoyed by the dizzying pace of issuance since 2017.
This debt has to be repaid, of course (in theory). Leveraged loan borrowers are in no hurry to do that, however, as the bulk of these loans don’t reach maturity until starting in 2021, when $107 billion comes due. That number ramps up sharply, peaking at $308 billion set to mature in 2024, according to LCD.
Why there is relatively little debt coming due in the near term is part of an interesting dynamic for the market.
Because of sustained institutional and retail investor cash flowing into this floating-rate asset class over the past two years – thanks to the specter of long-awaited rate hikes by the Fed – loan issuers have been able to refinance virtually all outstanding debt cheaply and easily, continually pushing maturities further along the horizon (that’s what was meant earlier in saying these loans have to be repaid “in theory”).
That borrower-friendly market can’t last forever, however. Already it’s been 10 years since the end of the last credit cycle, and there is at least a hint of consensus that, barring some exogenous event, the credit markets could have perhaps another two years of relatively smooth sailing.
When that period ends, however, borrowers might have less options where refinancing is concerned, just as increasing amounts of this debt comes due. – Staff reports
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