Greater than half (57 per cent) of US lenders anticipate that the restoration charges on defaulted senior secured debt will stay beneath historic norms within the yr forward, based on a brand new survey.
FTI Consulting’s 2024 Leveraged Mortgage Market Survey additionally discovered that US-based lenders are cautiously optimistic in regards to the financial system within the yr forward, with 45 per cent of respondents stating that the likelihood of a US recession is minor. This compares to 29 per cent who believed there was solely a minor threat of recession final yr.
“It’s encouraging to see extra optimism on this yr’s survey, however the expectation of ongoing low restoration charges probably begins to have an effect on behaviour each earlier than and after filings,” mentioned David Katz, a senior managing director within the senior lender advisory observe throughout the company finance and restructuring section at FTI Consulting.
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“It’s clear, formidable challenges stay earlier than the financial system and markets are really free to run.”
66 per cent of non-bank lenders mentioned that they anticipate restoration charges to be decrease than regular this yr, in contrast with 53 per cent of financial institution lenders.
Nearly half (46 per cent) of respondents mentioned that top rates of interest symbolize probably the most underestimated threat by monetary markets in 2024, whereas two-thirds of respondents (67 per cent) mentioned that inflation will stay above the Fed’s goal by the top of the yr.
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“Final yr started with a variety of pessimism in regards to the impacts of excessive inflation and financial tightening, nevertheless it ended with many satisfied that inflation had been tamed, a recession had been averted and earnings development was set to renew,” mentioned Chuck Carroll, senior managing director and chief of FTI’s senior lender advisory observe.
“The findings on this yr’s survey level to extra tempered enthusiasm, with the continuation of excessive rates of interest and lingering financial uncertainties decreasing respondents’ expectations for 2024.”
The survey additionally discovered that ESG concerns have gotten much less necessary to lenders, with 41 per cent of respondents saying that ESG components minimally impression their lending choices, if in any respect, in comparison with 27 per cent final yr.
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