Exchanges Corporate credit concerns
8 snips
Aug 15, 2023 
Boaz Weinstein, founder and CIO of Saba Capital Management, and Lotfi Karoui, chief credit strategist of Goldman Sachs, discuss concerns about refinancing risk and maturity wall for corporates and the uncertainties in corporate credit markets. They also explore the outlook for private credit markets in a higher rate environment and examine the argument of amending and extending in private markets.
AI Snips
Chapters
Transcript
Episode notes
Defaults Likely To Normalize Not Explode
- Lotfi Karoui expects defaults to mean-revert toward long-run averages rather than spike into double digits over the next 12 months.
- He cites stronger starting debt-coverage ratios and brighter soft-landing odds as reasons most firms can withstand higher-for-longer rates.
High Starting Coverage Ratios Provide A Buffer
- Karoui highlights debt coverage ratios sit near multi-decade highs today, giving companies a buffer against rising funding costs.
- He warns ratios will deteriorate as firms refinance at higher rates, but the strong starting point matters.
Broadly Syndicated Loans Face Faster Stress
- Karoui expects faster defaults in broadly syndicated loan markets because many borrowers rely entirely on floating-rate loan funding.
- Those issuers face constrained ability to transition to a higher-cost capital environment.