Loan investors brace for lower recoveries
Buy-siders expect to recoup up to 30 percentage points less if borrowers default
Leveraged loan investors are expecting to recoup less capital when companies default, after more than a decade of low rates eroded creditor protections in loan documents.
The average amount recouped by investors if a lender defaulted – known as the recovery rate – has historically been around 65–70% of a loan’s principal in the US and 75–80% in Europe. Now, participants in both markets are expecting the figure to be as much as 30 percentage points lower.
Investors say that lax lending
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Investing
NAIC proposes asset tests for offshore reinsurance
Cashflow assumptions that prove too aggressive could lead to follow-up action – Minnesota supervisor
Gamma jitters from defined outcome funds
Tumbling equity markets could flip dealers’ exposure to gamma from long to short, leading to hedging losses
Could the SEC revive the private fund adviser rule?
Industry experts deem a second life for the reviled rule unlikely
Securitisation clears way for UK insurers to buy ground rents
Asset manager says booming sector will make up for falling demand from pensions
Capital rules explain leverage craving in US bank risk transfers
Tougher requirements have led to conservative structuring and lower coupons
SEC intensifies scrutiny on ‘AI washing’
Regulator made first enforcement actions against high-tech misrepresentations this year
Hedge fund’s bots hunt for ‘non-linear’ trade signals
Boutique investment firm Goose Hollow uses LLMs to scrape thousands of news sources, searching for links that others miss
OCC readies new intraday margin requirement
Draft measure would cover all options positions including 0DTEs