After Citrix: Leveraged finance and the point of no return
With broadly syndicated markets largely shut and CLOs facing formidable challenges, leveraged finance has had a tough year. It has been a story of big hung deals and a market that is even more reliant on credit funds than before. With little clarity over when interest rates will peak, let alone start to fall, how will participants manage their way through the turmoil?
Twelve months ago, it would have been difficult to predict just how turbulent 2022 would prove to be in the world of leveraged finance. While expectations were not for a repeat of 2021’s bumper year in capital markets and M&A, investment bankers’ predictions were well short of disastrous. Inflation was starting to be a talking point, but rates still hadn’t moved. And even if they rose over time, surely they wouldn’t leap up so sharply that they would threaten post-pandemic recoveries?
Some $660 billion had been raised in the global high-yield debt markets in 2021, according to Moody’s, while leveraged loan volumes had hit almost $1 trillion. And at the start of 2022, private equity (PE) firms were still loaded up with dry powder of more than $1.5 trillion.