Credit Markets Update Q2 2023

New-issuance loan volume continued at a slow pace during the second quarter as borrowers continue to feel the pressure of high debt servicing costs

• Second quarter new issue leveraged loan volume reached $77.9 billion, down sharply from $131.3 billion in the second quarter of 2022, but recording the highest volume for past twelve months
  • The leveraged loan market continues at a slow pace as borrowers seek new deals focused on debt repayment and maturity extension
• Refinancing volume of $45.1 billion accounted for much of the new-issue volume in the quarter, albeit down 4% compared to the first quarter
  • Over 74% of refinancing volume mix was composed of single-B rated issuers dealing with maturity walls
• M&A activity continues to languish with $36.0 billion of issuance during the first half of the year
• Private credit continue to be the financing of choice for buyouts, outpacing the syndicated loan market in LBO activity
  • Private credit continues to be favored by private equity sponsors primarily driven by certainty of close as regional banks continue to be cautious
• Default rates reached 1.4% for the first half of 2023, the highest level since 2020
  • Borrowers expect to feel continued stress as covenants continue to be burdened with higher interest costs