Leveraged loans are generating their biggest losses of the year as investors pull back from even the safest debt in a company's capital structure on concern that Europe's financial crisis will spark a global slowdown that diminishes the creditworthiness of borrowers.

Syndicated loans of speculative-grade borrowers lost 1.22 percent last month, the most since November, snapping the longest rally since the eight months ended February 2011, according to the Standard & Poor's/LSTA U.S. Leveraged 100 Loan index. The last time investors lost money in the debt of companies such as Energy Future Holdings Corp. was in November, when the market fell 1.34 percent.

At the same time that Spain seeks a bailout for its banks and speculation increases that Greece will leave the 17-member euro, Federal Reserve data released last week showed corporate profits are climbing at the slowest pace since they dropped in the final quarter of 2008. Growth in commercial and industrial lending is slowing as banks retrench, Fed data also show.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.