DL Deals: News & Analysis – 10/24/2022

Managers could face 16% increase in cash-flow challenged issuers next year

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Portfolio managers are potentially facing a 16% rise in the number of borrowers that cannot generate enough cash flow to meet interest expenses by the end of 2023, based on an analysis by KBRA DLD’s new parent, Kroll Bond Rating Agency (KBRA).

The analysis dissects a portfolio of roughly 2,000 direct lending loans that have been privately assessed by KBRA (not DLD). The 16% increase assumes 12% debt costs by 2Q 2023, based on widely anticipated Fed rate hikes.