Decade-High $100 Billion Of Corporate Loans Refinanced In January As Companies Prepare For Higher Rates

Anyone who slipped into a coma 10 years ago and suddenly woke up today, may come to the erroneous conclusion that not much had happened in U.S. debt and equity markets over the past decade.  Like in 2007, equity markets seem to surge to all new highs with each passing day, corporate credit spreads have tightened to 10-year lows and leveraged loan refinancings are soaring as all the "money on the sidelines" just can't seem to find a home fast enough. 

As the Wall Street Journal noted today, the fear of rising interest rates, which have so far largely been offset by tightening spreads for corporate levered loan borrowers, has sparked a massive wave of corporate loan refinancings, including $100 billion worth of volume in January 2017 alone.  Moreover, per data from LevFin Insights, $222 billion, or nearly 25% of the entire leveraged loan market, has been refinanced since October.

Rising interest-rate expectations are fueling the biggest corporate-refinancing boom in years.


U.S. companies refinanced $100 billion of loans in January, the largest monthly total in at least a decade, according to data from S&P Global Inc. More than 110 low-rated companies, including software giant Dell Technologies Inc. and car-repair chain Service King Collision Repair Centers Inc., have refinanced loans since October, according to data from LevFin Insights LLC.


Borrowers in recent months have saved more than $1 billion in annual interest costs by renegotiating terms with their lenders, according to a Wall Street Journal analysis of the data.


Total repricings since the start of October amount to $222 billion, representing 24% of all outstanding leveraged loans, according to LevFin Insights. Firms negotiated an average interest reduction of 0.59 percentage point.



Of course, rising interest rates, which are feared to continue pushing higher, are sparking this latest refinancing bubble...

3M LiBOR corporate borrowers have sought to offset increases in LIBOR rates with tighter spreads.

Corp Spreads


Of course, none of this madness would be possible without all that "money on the sidelines" just waiting for the next new issue from Goldman that will grant them a 5% allocation at a spread 75 bps lower than the initial pricing talk.

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