TSL Express Daily News

Fitch Ratings-New York-26 April 2021: The 2021 institutional loan default rate forecast has been lowered to 2.5% from 4.5%, according to a new Fitch Ratings report.

"Operating conditions are starting to improve due to the ramp-up in coronavirus vaccinations and the easing of restrictions," said Eric Rosenthal, Senior Director of Leveraged Finance. "A continuation of the current strong economic backdrop could result in the rate dropping even lower, to around the 1.8% mark registered in both 2018 and 2019."

The Market Concern Loans total declined for the 12th straight month and is now off 22% from the April peak, but still up 16% from pre-pandemic levels. The current $200.9 billion total, the lowest amount since February 2020, is heavily concentrated in the Other Market At-Risk Loan Issuers at 43%, and Tier 2 Market Concern Loans at 39%. Fitch's Top Market Concern Loans list stands at $37 billion, falling 47% from the April highs.

Leisure/entertainment, healthcare/pharmaceutical and consumer products comprise 65% of the Top Market Concern Loans list.

The leisure/entertainment default rate forecast was reduced to 18% from 30%, and the rate could potentially finish even lower at around last year's 9.9% mark. Cineworld Cinemas and Travelport are two of the largest Top Market Concern Loan issuers. Nevertheless, movie theatres and gyms are, for the most part, in a better position than mid/late last year.

Retail has the most Top Market Concern Loan issuers, though nearly all are large middle market. The April trailing 12-month default rate is 19.5%, but is expected to decline to 8% by yearend. Energy is projected to finish the year at 6%, dropping from 19.8% currently.

The April trailing 12-month default rate stands at 3.4%, the lowest level since one year ago and down from the 4.5% October 2020 peak.

Fitch also lowered its 2022 default forecast to 2.5%-3.5% from our previous 4%-5% expectation. The revision results in a 2020-2022 cumulative forecast of 9%-11% and would finish below the three-year cumulative default rate of 15% during the 2008-2010 financial crisis.

For more information, a special report titled "U.S. Leveraged Loan Default Insight Report" is available on the Fitch Ratings' website at www.fitchratings.com.

Contact:

Eric Rosenthal
Senior Director
Leveraged Finance
+1-212-908-0286

Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004

Brendan Hoelmer
Associate Director
+1-646-582-4781

Media Relations: Elizabeth Fogerty, New York, Tel: +1 212 908 0526, Email: elizabeth.fogerty@thefitchgroup.com.

Additional information is available on www.fitchratings.com.

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