Brookfield Asset Management, Oaktree Capital Management -Thu, 10/26/2023 - 16:24

Performing Credit Quarterly 3Q2023: Tails, You Lose?

How healthy are today’s leveraged credit markets? If you focus on averages, you’d likely conclude that fundamentals are fairly strong despite elevated interest rates and slowing earnings growth. The average debt-to-EBITDA ratio for U.S. leveraged credit was around 4.0x at the end of the second quarter, down from a high of 6.5x in 4Q2020 and just under 5.0x in 4Q2019.¹ While average interest coverage ratios² have deteriorated over the last year, the current levels – 5.3x for U.S. high yield bonds and 4.5x for U.S. leveraged loans – aren’t sounding alarm bells.³ However, this environment reminds us of one of our co-chairman Howard Marks’s favorite adages, concerning the six-foot-tall man who drowned crossing the stream that was five-feet deep on average.

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Authored by: Oaktree Capital Management
Authored on: Thu, 10/26/2023 - 16:24

Brookfield

Brookfield Asset Management is a leading global alternative asset manager with approximately $1 trillion of assets under management across renewable power and transition, infrastructure, private equity, real estate, and credit. We invest client capital for the long-term with a focus on real assets and essential service businesses that form the backbone of the global economy. We offer a range of alternative investment products to investors around the world — including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors. We draw on Brookfield’s heritage as an owner and operator to invest for value and generate strong returns for our clients, across economic cycles.

Roger Kramer
Managing Director, Insurance Strategist
roger.kramer@brookfield.com
+1.646.774.3472

https://www.brookfield.com/
250 Vesey Street, 14th Fl. New York, NY 10281

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