The default rate on leveraged loans increased rapidly early in the pandemic but has declined since last summer (figure 2-7). Additionally, downgrades of leveraged loans have slowed significantly over the same period, returning to their pre-pandemic pace. However, the share of newly issued loans to large corporations with high leverage-defined as those with ratios of debt to earnings before interest, taxes, depreciation, and amortization greater than 6-has exceeded the historical highs reached in recent years (figure 2-8).
2-7. Default Rates of Leveraged Loans
Note: The data begin in ount in default over the past 12 months divided by the total outstanding volume at the beginning of the 12?month period. The shaded bars with top caps indicate periods of business recession as defined by the National Bureau of Economic Research (NBER): , and –present. As of the publication of this report, the NBER has not declared an end to the current recession. Læs videre “Expected default rates on leveraged loans have fallen, although underwriting standards appear to have weakened”