Credit Markets Update Q2 2023

Read more about M&A activity and trends in this sector

Mike Rudolph

Mike Rudolph

Managing Director, KPMG Corporate Finance LLC

+1 708-391-7342

New-issuance loan volume continued at a slow pace during the second quarter as borrowers continue to feel the pressure of high debt servicing costs

  • Second quarter new issue leveraged loan volume reached $77.9 billion, down sharply from $131.3 billion in the second quarter of 2022, but recording the highest volume for past twelve months
    • The leveraged loan market continues at a slow pace as borrowers seek new deals focused on debt repayment and maturity extension
  • Refinancing volume of $45.1 billion accounted for much of the new-issue volume in the quarter, albeit down 4% compared to the first quarter
    • Over 74% of refinancing volume mix was composed of single-B rated issuers dealing with maturity walls
  • M&A activity continues to languish with $36.0 billion of issuance during the first half of the year
  • Private credit continue to be the financing of choice for buyouts, outpacing the syndicated loan market in LBO activity
    • Private credit continues to be favored by private equity sponsors primarily driven by certainty of close as regional banks continue to be cautious
  • Default rates reached 1.4% for the first half of 2023, the highest level since 2020
    • Borrowers expect to feel continued stress as covenants continue to be burdened with higher interest costs

New Issue Leveraged Loan Volume ($bn)

Count of LBOs financed in broadly syndicated vs private credit markets

High yield volume reached $93.6 billion during the first half of 2023, already approaching the $102.3 billion total of 2022

  • Second quarter volume of $53.6 billion marks a significant improvement over $24.7 billion during the same period in 2022
  • The average yield at issuance ended the second quarter at 8.7%, but not before testing a peak of 8.8% amid the top of the banking crisis

High Yield Volume ($bn)1

After ten consecutive interest rate hikes, the Federal reserve paused rate hikes in June to assess the policy impact before further tightening through the remainder of 2023 

  • SOFR closely tracks the federal funds rate, and now remains above 5%
  • The Federal Reserve indicated the possibility of more rate increases, albeit at a slower pace, to combat inflation. The Federal Reserve remains committed to its 2% inflation target


  1. PitchBook | Leveraged Commentary & Data, KPMG market research

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