The Credit Edge by Bloomberg Intelligence Aegon Is Worried About Junk-Debt Blowups
Oct 9, 2025
Jim Schaeffer, Global Head of Leveraged Finance at Aegon Asset Management, discusses the looming distress in highly indebted companies as the economy slows. He shares insights on third-quarter earnings, the implications of lower interest rates, and the distinct stress patterns across sectors like chemicals and food. Schaeffer also emphasizes the importance of understanding consumer behavior and the risks associated with public versus private credit markets, all while urging caution around late-cycle investment trends.
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Bifurcated Credit Market Risks
- Credit markets are highly bifurcated with most credits tight but a vulnerable bottom 10% facing steep falls into restructuring.
- Jim Schaeffer warns that loan markets see aggressive LME and restructuring when weaker names miss earnings.
Act Early On Refinancing Stress
- Use rate cuts to ease refinancing pressure but don’t assume lower rates will save structurally weak businesses.
- Prioritize refinancing viability for borderline firms and act early when signs of trouble appear.
CLO Downgrades Can Trigger Cascades
- CLO mechanics amplify stress because rating downgrades force sales and create cascade selling pressure.
- Downgrades and rising CCC counts can become self-fulfilling and intensify loan market dislocations.