U.S. Middle Market CLOs’ ‘CCC’ Exposure Rising in Third Quarter Negative rating migration has increased the average exposure to assets rated ‘CCC+’ or below to 19.4%, up 4.3% compared to 2Q23, across U.S. middle market (MM) collateralized loan obligations (CLOs) under surveillance by Fitch Ratings…. Subscribe to Read MoreAlready a member? Log in here...
Fitch’s Private Middle Market, Model-Based Credit Opinion (MBCO) Portfolio, 2Q23 Fitch’s privately covered middle market (MM) portfolio is comprised of generally smaller issuers (with average EBITDA of $51M, average revenue of $275M and average debt of $299M). The portfolio comprises of issuers in the b+* to c* range (asterisk denotes Credit Opinion)…. Subscribe to Read
Fitch’s Private Middle Market Portfolio, Rating Activity Upgrades/downgrades within Fitch’s private MM portfolio are generally skewed toward downgrades, as issuer ratings can be constrained on the upside based on limited scale. Downgrades increased sharply in 2020 due to the impacts of the pandemic…. Subscribe to Read MoreAlready a member? Log in here...
How Might MM CLO Note Ratings Fare Amid High Rates and EBITDA Pressures? To assess the effect of higher interest rates, Fitch applied a rate of 5.5%, and 6.5% to represent a longer rate hike cycle. These rate stresses were combined with EBITDA haircuts to represent cost pressures on loan issuers as a result of…
How Have BDC Funding Profiles Trended? BDCs took advantage of strong capital market conditions moving out of the pandemic to issue record amounts of unsecured debt, which enhanced funding flexibility and extended funding durations…. Subscribe to Read MoreAlready a member? Log in here...
How Have BDCs Performed Due to Rapidly Rising Interest Rates? BDCs were well positioned to benefit from rising rates, given largely floating rate portfolios and the increase in fixed-rate funding following meaningful unsecured debt issuance in 2H20 through 1H22…. Subscribe to Read MoreAlready a member? Log in here...
Default Outlook for Middle Market Fitch recorded eight defaults in our Private Monitored Rating (PMR) portfolio in 2022, down from the pandemic-affected years of 2020 and 2021 when we recorded 23 and 18 respectively. YTD defaults through June 2023 total seven, one short of the total in 2022 and ahead of full-year 2018 and 2019…
Rating Trend for Middle Market Issuers Following a modestly positive 2021 in which upgrades in Fitch’s Private Monitored Rating portfolio outpaced downgrades at a rate of around 1.2x, downgrades outpaced upgrades in 2022 at a 1.8x rate as inflation crimped earnings. Downgrades continued to outpace upgrades in 1Q23, with around two downgrades for every upgrade…
Latest Performance Trends for U.S. MM CLOs Defaulted and deferring exposure across MM CLOs remained low at 0.7% in 1Q23, while deferrables stood at 6.4%. Exposure to assets rated ‘CCC+’ or below by Fitch Issuer Default Rate Equivalency Rating, as described in Appendix 5 of Fitch’s CLOs and Corporate CDO Rating Criteria, registered at 15.8%….
Defaults in Fitch’s Private MM Portfolio Tick Higher Following a sharp increase in 2020 and 2021 due to the pandemic, defaults were largely subdued in 2022 in Fitch’s private middle market portfolio… Subscribe to Read MoreAlready a member? Log in here...