The syndicated loan market shows better credit metrics as compared to 2022 when interest rates started to spike. In the interim, some of the weakest companies suffered a default or went through a restructuring, but most companies were able to adapt to the new challenging economic market environment.
On the one hand, leverage metrics, measured in terms of Total Debt/EBITDA, decreased during 2023 reaching 5x in Europe and 4.5x in the U.S. Despite a slightly higher increase in Europe, current levels are still well below 2022 figures.
On the other hand, the equity cushion required in LBO transactions is at historical highs in the U.S. (53%) and at reasonably strong levels in Europe (49%) as of March 2024. This buffer improves the company’s credit profile and increases security for lenders.
