Leveraged loans and direct lending reached record highs in 2024
Both leveraged loan and direct lending issuance rose to record highs in 2024, according to a new report by Fitch Ratings.
According to new data from the ratings agency, leveraged loan issuance increased by 300 per cent year-on-year to $1.18tn (£0.9tn) last year, while direct lending issuance grew by 79 per cent year-on-year to reach $145bn.
Meanwhile, high-yield issuance rose by 61 per cent to $282bn, although it remained well below the 2021 record of $443bn.
Read more: Majority of Fitch-rated sub lines have AA+ rating
“Robust refinancing, repricing volumes, and strong demand for collateralised loan obligations drove leveraged loan issuance to reach an all-time high in 2024,” said Timothy Lee, director in Fitch’s US leveraged finance group.
“Private credit also continued its ascent, with private equity sponsors favouring direct lending due to faster turnaround, execution certainty, confidentiality, and bespoke solutions.”
Read more: Fitch: Competition in private debt is intensifying
Fitch added that the leveraged loan market faced escalating credit defaults in 2024, ending the year with a 5.3 per cent default rate – higher than the 4.5 per cent default rate which was recorded during the pandemic in 2020.
Conversely, the high-yield default rate fell to 2.6 per cent in 2024, down from three per cent in 2023.
Fitch also reported lower recovery outcomes through bankruptcy for broadly syndicated loan first-lien issuers in 2024.
Liability management transactions, sector representation and capital structure composition were among the factors depressing the par-weighted average first-lien recovery to 39 per cent in 2024, down from 51 per cent in 2023 and 76 per cent in 2022.
Read more: Fitch: US private credit defaults to rise in 2024
