March 14 (The following statement was released by the rating agency)
The U.S. institutional leveraged loan default rate
ended 2013 at 1.6%, just shy of the 1.8% recorded in 2012 and below 2% for the
fourth consecutive year, according to Fitch Ratings. The default rate posted a
recession high of 10.5% in 2009.
There were 13 loan issuer defaults in 2013, less than half the number recorded
in 2012. However, the pool included several defaults in excess of $1 billion
(Cengage, Supermedia, Dex One, GateHouse Media ), propelling the year's dollar
default tally to $10.5 billion, close to the prior year's $10.7 billion. The
market grew year over year, resulting in some modest downward pressure on the
par default rate.
There were no defaults in the first two months of 2014 bringing the trailing
12-month loan default rate to 1.5% through February.
The U.S. high yield default rate was 1.5% in 2013 and was also down to 1.3% in
Default activity across high yield and leveraged loans has been quite similar
since 2007, both in magnitude and direction. This symmetry is primarily due to
the shared speculative grade sensitivity to macro conditions. In addition,
approximately 40% of institutional loan volume is associated with companies that
also have high yield bonds in their capital structure. The performance of these
joint issuers affects both areas.
The average post-default price of first lien institutional loans was 69.4% of
par in 2013. The median first lien price was higher at 73.9%.
The institutional leveraged loan market expanded at a substantially faster clip
than the high yield bond market in 2013, up 26% year over year to $725 billion
versus 12% for high yield ($1.265 trillion). Momentum has continued into 2014
with outstanding volume reaching $755 billion in February.
For additional details on loan default and recovery trends please see "Fitch
U.S. Leveraged Loan Default Insight, Loan Market Gathers Momentum."