Credit Markets Update Q4 2022

Read more about the credit markets activity during Q4 2022

Mike Rudolph

Mike Rudolph

Managing Director, KPMG Corporate Finance LLC

+1 708-391-7342

Leveraged loan volume sharply decreased in 2022 amid significantly higher borrowing costs and increased recessionary risks to the economy

  • Fourth quarter new-issue leveraged loan volume reached $59.7 billion, down sharply from $171.9 billion in the fourth quarter of 2021. Full year 2022 new-issue volume reached $436.0 billion, a dramatic decline from $798.0 billion in 2021
    • Liquidity in the bank market receded in 2022. Higher rate-induced market-to-market losses and deposit base uncertainty placed pressure on bank capital causing a sharp decline in syndicated loan volume
    • The mood is brighter in the private credit market where direct lenders have continued to gain share amid record amounts of dry power allocated to the asset class
  • Refinancing volume did make a comeback in the fourth quarter. Higher-rated issuers chipped away at near term maturities, pushing volume to $21.5 billion, the highest quarterly total in 2022.

New Issue Leveraged Loan Volume ($bn)

Source: LCD Quarterly Q3, 2022: Volume: Quarterly US Dollar Denominated New-Issue Global Leveraged Loans. Pg 166

Count of LBOs financed in broadly syndicated vs private credit markets

Source: LCD Quarterly Q3, 2022

Higher interest rates continue to put downward pressure on high-yield bond issuance with the last six months of 2022 period recording the lowest post-global financial crisis levels

  • Fourth-quarter issuance of $15.4 billion, down 78% year-over-year, compares with $70.2 billion for the same period in 2021
  • The average yield at issuance was 10.4% in the fourth quarter, the first double-digit average for any quarter since 2009

High Yield Volume ($bn)

Source: LCD Interactive High Yield Report, Monthly & Quarterly Volume tab

The Federal reserve raised interest rates by 50 bps in December citing high inflation, bringing the target federal-funds rate to between 4.25%-4.5%. 2022 saw a total of seven interest rate increase from the Federal reserve

  • The increase in the federal funds rate was mirrored by SOFR which has increased from 0.50% in 2021 to near 4.50% in 2022

High Yield - Average New Issue Yields

Source: LCD Interactive High Yield Report, Monthly & Quarterly Volume tab

Secured Overnight Financing Rate (SOFR)

Source: New York Fed; 90-day Term SOFR rate

We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below.


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