We are seeing a slowdown in sales and earnings growth – Carlyle’s Lauren Basmadjian

“From what I could see in our proprietary data, we are seeing a bit of a slowdown,” says Lauren Basmadjian, head of liquid credit at Carlyle, a powerhouse with USD 199bn in credit assets under management, in the latest ‘Credit Exchange’ podcast with Lisa Lee.

It's early days, with only about 10% of the portfolio companies that Carlyle lends to having reported thus far. Cautioning that it’s not fulsome data, Basmadjian says that companies are reporting low-single-digit growth in the second quarter, down from mid-single-digit growth in the first. And it’s happening in both the US and Europe.

When investing, be conservative right now, advises Basmadjian. For example, leveraged loan spreads have fallen to remarkably low levels, with some at tights not really seen before the Great Financial Crisis. Between the two markets, the European loan market offers better value, she believes.

“When I look at the loan portfolios that we could put together in Europe versus the US, you probably capture an extra 60 basis points or so,” Basmadjian says.

As for LBOs, Basmadjian says there are more processes going on in the background, but it’s too early to tell whether they’re going to come to fruition. “When pencils went down in April, pencils are back up now,” she notes.

“But it takes a while to get the engine going. And we don’t expect to see a lot of new LBO and M&A activity for the remainder of the year. That saddens me to say. But I do think that there’s a lot more in the background, and it just takes a while for it to come to our market.”