Leveraged Loan Demand Strong Despite Weakening Borrowers and Increasing Defaults

DBRS, Inc. (DBRS Morningstar) published a commentary analyzing the sources of demand for leveraged loans, as well as the impact of the Coronavirus Disease (COVID-19) and related economic fallout on the highly leveraged borrowers that are utilizing this source of funding. The prolonged period of very low interest rates combined with a benign credit environment have contributed to significant demand for riskier, higher yielding investment products over the past decade. This demand is very evident in the growth of leveraged lending, which has reached record levels.