Economic and Political Uncertainty Take a Toll on Leveraged Finance Market

The leveraged finance market pulled back in the fourth quarter as wide-ranging uncertainty forced lenders to rethink their risk tolerance.

Tuesday, January 22, 2019

The leveraged finance market roared out of the gates in the fourth quarter, with October recording the second-highest monthly volume of 2018. But the momentum fell victim to the volatile conditions that roiled equity markets in the last three months of 2018.

Uncertainty around issues such as economic growth, trade policies, interest rates, and the overall political landscape pushed lenders to focus on credit quality, chased away retail investors, and largely eliminated opportunistic issuances. Total leveraged loan volume fell from $67 billion in October to $33 billion in November before closing out the year with a mere $13 billion in December, the lowest monthly total in three years. During that same period, the percentage of total volume from opportunistic transactions fell from 53% in October to only 6% in December.

Highlights of this quarter's Leveraged Finance report include:

  • Middle-market high-yield: primary issuance slows amid turbulent secondary trading performance
  • Where do we go from here? Expectations for the leveraged finance market in 2019
  • William Blair Leveraged Lending Index falls to lowest level since mid-2016
  • Highlights from William Blair's Quarterly Leveraged Lender Survey


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