Patrick Keane
June 20, 2016
Principal, Lampe, Conway & Co. LLC

Debt Refinancing Now Much More Difficult for Smaller, Troubled U.S. Companies

According to JP Morgan, year-to-date high-yield bond refinancing volume YTD is down approximately 30% and institutional loan refinancings/re-pricings are down over 22%.  Debt refinancing activity peaked in 2013 at $700bn, followed by substantial declines of 58% in 2014 and 60% in 2015.  

For smaller, over-leveraged companies the low absolute level of interest rates is no longer good news - it means economic growth remains challenging. The lack of revenue growth is limiting smaller companies’ ability to grow into their over-leveraged balance sheets.  It should not be surprising then that investors are now growing more risk averse and avoiding leveraged securities for these companies. Slowing refinance activity means fewer and fewer small companies will be able to manage their approaching debt maturities without restructuring, thereby increasing the likelihood of an acceleration in distressed credit activity.


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