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Goldman Sachs Exchanges

Corporate credit concerns

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.
22:56

Episode guests

Boaz Weinstein
Lotfi Karoui

Podcast summary created with Snipd AI

Quick takeaways

  • Corporate America's credit is expected to experience a mean reversion towards the long-term average, but the risk of a severe deterioration is reduced due to healthy corporate fundamentals and a brighter economic outlook.
  • Credit spreads are influenced by market dynamics and may shift quickly in response to changing market conditions, with further tightening unlikely due to already tight spreads and low default rates.

Deep dives

Credit Outlook: Corporate America's Credit Health

Goldman Sachs Exchange podcast explores the impact of surging interest rates on the health of corporate America's credit. While concerns about a major default cycle are low, a mean reversion in default rates towards the long-term average is expected. The optimistic outlook is supported by healthy corporate fundamentals and a brighter prospect of a soft landing for the economy, reducing the risk of a severe deterioration. However, the leverage finance space and the broadest-innocated loan market require closer monitoring due to limited ability to transition to a higher-cost capital environment. Refinancing risk for corporates in 2024 or 2025 is not a significant concern, as it is not front-loaded and there is capacity on the investor side to absorb it.

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