Weakest Links Rising

Apollo Chief Economist

Weakest Links are loan issuers rated B-minus or lower with a negative outlook.

The number of US leveraged loan Weakest Links continues to increase, driven by higher costs of capital and costlier financing terms, see chart below.

This is how monetary policy works. Higher cost of capital makes it harder for more vulnerable companies to get financing.

Source: Pitchbook | LCD, Morningstar LSTA US Leveraged Loan Index, Apollo Chief Economist. Data through June 30, 2023. Note: SD and D – An obligor rated “SD” (Selective Default) or “D” has failed to pay one or more of its financial obligations (rated or unrated) when it came due. A “D” rating is assigned when Standard & Poor’s believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An “SD” rating is assigned when Standard & Poor’s believes that the obligor has selectively defaulted on a specific issue or class of obligations, but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.

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