Nov 21 (Reuters) – Default rates on U.S. leveraged loans will hit a near-record high of 11.3% in 2024, while defaults on euro leveraged loans will hit 7.1%, as the global economic outlook deteriorates, Deutsche Bank said on Monday.
For 2023, however, Deutsche Bank expects default rates to be kept in check given the lack of near-term maturities.
The bank said in a research note it expects a 5.6% default rate in the United States and 3.7% rate in the euro market respectively in 2023.
But it expects default rates to rise from then onwards.
Leveraged loans are usually taken out by companies with already high levels of debt and with below-investment grade credit ratings.
Deutsche Bank analysts said companies with a high total debt-to-earnings ratio will face a significant hit to their profit margins with the U.S. economy likely to slip into a recession in the second half of next year.
This will lead to more distressed exchanges and missed…
