KBRA releases its 2024 Structured Credit Sector Outlook, which discusses structured credit issuance and themes for transactions and leveraged loans in 2023, as well as tailwinds and headwinds for issuance and performance next year.

The structured credit market faces a challenging road ahead in what is expected to be a “higher-for-longer” interest rate environment. Loan originators and portfolio managers will continue to consider balance sheet cash, capacity under revolvers, and the ability to raise new capital in their assessments of corporate borrowers with higher financing costs. The drastic shift in rates has also caused corporate valuations to taper off, increasing lender and sponsor focus on their portfolio companies’ cash flows and cost structures. Direct lenders and middle market (MM) collateralized loan obligation (CLO) managers, for example, have stressed the importance of iterative underwriting to continuously evaluate the sufficiency of borrower liquidity and the length of their cash burn runway. During this period of elevated rates and economic uncertainty, private credit has helped to stabilize the liquid loan market somewhat. Certainty of execution, fewer counterparties, and more controllable outcomes have attracted capital and should continue to bring more deal flow to the private credit space, supporting above-average volume for vehicles like middle market CLOs going forward.

In the report, KBRA highlights its 2024 issuance forecast for U.S. structured credit and European broadly syndicated loan (BSL) CLOs. The former includes BSL and MM CLOs, as well as securitizations of recurring revenue loans. We also highlight recent KBRA research within the structured credit sector.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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