The Cost of Hedging in the High Interest Rate Environment

It's estimated that about two thirds of the $1.4 trillion leverage loan market was unhedged at the end of 2021, after which hedging costs skyrocketed. A lot of borrowers were putting in capital structures that are likely going to be unsustainable in this higher interest rate environment. Even if these companies don't have near-termaturities that might force a default, they can absolutely run into liquidity issues as they seek to service this growing debt burden.