Harris Associates’ Adam Abbas discusses leveraged finance market tone, anticipating rate cuts' impact on corporate issuance. Private credit competes with syndicated loan market. Podcast also covers restructuring world updates and previews upcoming legal events.
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Quick takeaways
Inflation concerns drive leveraged loan issuer strategy in the market, with inflation normalization dynamics shaping both risks and opportunities.
Anticipated rate cuts by the Fed in 2024 contribute to a favorable environment for leverage finance, affecting market expectations and pricing adjustments.
Deep dives
Inflation Risks and Leveraged Finance Market
Inflation remains a key concern for the leverage finance market, influencing how leveraged loan issuers approach new deals. The dynamics of inflation normalization impact the market heavily, with both upside and downside risks being significant. The possibility of inflation stabilizing around low twos creates a positive outlook for the leverage finance market. With the potential for inflation to decrease, leveraged loan market conditions could improve, leading to increased activity.
Impact of Rate Volatility and Fed's Decisions
Concerns regarding rate volatility play a crucial role in how fixed income investors navigate new primary deals. The Fed's decision to anticipate rate cuts in 2024 has already influenced market expectations and pricing. The market has adjusted to anticipate an easier environment, leading to lower nominal rates and favorable total returns. This adjustment has boosted optimism in the leverage finance sector and positively impacted the primary market.
Private Credit Deals and Market Dynamics
Private credit deals are emerging as a significant player in the primary market, impacting traditional syndicated loan structures. The growth and prominence of private credit pose challenges to broadly syndicated loans. While private credit's presence is expected to grow structurally, competition between private credit and syndicated loans may lead to a more competitive landscape. These shifts may result in marginal changes in deal structures and pricing considerations over time.
This week, Reorg’s senior primary market reporter Michael Haley spoke with Harris Associates’ Adam Abbas, who is the head of fixed income at the firm, about the tone of the leveraged finance market so far in 2024 as well as what other other factors will impact the primary market. The episode includes Abbas’ thoughts on how the anticipated rate cuts by the Fed this year will impact corporate issuance as well as how private credit has rivaled the broadly syndicated loan market recently.
And, as always, we also bring you our weekly summary of interesting developments in the restructuring world as well as a preview of what’s on tap for next week.
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#leveragedfinance #highyield #restructuring #performingcredit #distresseddebt #debtrestructuring #leveragedloans
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