Exploring Macroeconomic Impact on Middle Market Leveraged Loans and Collateralized Loan Obligations
The following case study reviews how challenging macroeconomic conditions may have an impact on leveraged loan performance and explores the influence of certain forces, such as rising interest rates and inflationary pressures, on default likelihood of select middle market (MM) corporate borrowers. The discussion begins with the Q2 2022 macroeconomic results and then continues to evaluate economic developments as they unfolded, finishing with some expectations about future economic activity and its potential impact on the leveraged loan market and collateralized loan obligations (CLOs). The research exercise incorporated some of the economic data discussion as well as future expectations and hypothetical assumptions. As the macroeconomic environment continues to change rapidly, some of the results may be re-evaluated in subsequent case studies.
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