Greater than half (57 per cent) of US lenders count on that the restoration charges on defaulted senior secured debt will stay under 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 concerning the economic 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 danger of recession final yr.
“It’s encouraging to see extra optimism on this yr’s survey, however the expectation of ongoing low restoration charges doubtless 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 inside the company finance and restructuring phase at FTI Consulting.
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“It’s clear, formidable challenges stay earlier than the economic system and markets are actually free to run.”
66 per cent of non-bank lenders mentioned that they count on restoration charges to be decrease than normal this yr, in contrast with 53 per cent of financial institution lenders.
Virtually half (46 per cent) of respondents mentioned that top rates of interest characterize probably the most underestimated danger 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 numerous pessimism concerning the impacts of excessive inflation and financial tightening, however 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 essential to lenders, with 41 per cent of respondents saying that ESG components minimally influence their lending choices, if in any respect, in comparison with 27 per cent final yr.
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