The second in a series of SRS Acquiom sponsored surveys with direct lenders, investment bankers, advisors and attorneys offers a pulse of distressed debt and lending in June 2020.
Before we dive into the trends and data, keep in mind that our sample sizes are more qualitative than quantitative, and the result sets differ from survey to survey.
The responses indicate there may be a rebound in non-distressed lending as the second fiscal quarter of 2020 comes to a close. Nearly 60% of our panel report actively looking for lending opportunities, up from just over 50% in our May survey.
The type of new credit facilities seen this quarter shifted from May to June. Senior Secured Loans are reported as being closed and funded by nearly 80% of panelists, up from 45% in May. Similarly, panelists report seeing Second Lien Loans close and fund in June at double the incidence rate, 30%, as compared to May. Additionally, 51% of panelists report seeing DIP Facilities close and fund since April 1, 2020 down from 60% a month ago. Other lending activity the panelists report remains relatively unchanged in June versus May.
- 27% report Large Syndicated Loans
- 35% report Refinancing
- 30% report Acquisition Financing
While interest in lending opportunities has increased, SRS Acquiom’s panelists report that many of the borrowers are not investment grade. Over one-third of borrowers panelists saw in June were either mostly or entirely non-investment grade. Nearly 20% of borrowers in June were “mostly investment grade” and nearly half were “both investment grade and not investment grade.”
The effects of COVID-19 on credit facilities continue to be felt, with the trend getting worse in June. Over half of panelists report that 10-25% of their loan portfolio is in default or has a waiver in place, up from roughly a third of panelists reporting in May, while panelists reporting less than 10% of their portfolio being in default or having a waiver dropped from 26% in May to 19% in June.
Working Together, Or Delaying the Inevitable?
SRS Acquiom continues to see that Lenders and Borrowers are working together through the challenges brought on by COVID-19. Nearly 86% of Lenders are allowing Borrowers to defer payments and waive covenants, unchanged from a month ago. 43% of Lenders are requiring Borrowers to make operational changes, the same as a month ago. June saw more lenders (59%) extend additional funds under existing credit facilities compared to May (45%), and parties are refinancing existing loans at a higher rate than one month ago. As a result of these actions, our panelists report a drop in preparations to file for bankruptcy as compared to May; 43% of June panelists report seeing Lenders prepare borrowers for bankruptcy, 14 percentage points lower than May.
If you are a lender or attorney advising lenders and would like to participate in the next SRS Acquiom Barometer survey on Distressed Debt and Lending During COVID-19, please sign up below.
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Complete Survey Data
Tap or roll over charts for data labels.
Are you or your clients currently looking for new lending opportunities?
What types of Loans are you seeing close and fund in the market since April 1, 2020?
What is the financial health of the Borrowers you have seen enter into new Credit Facilities since April 1, 2020?
What percentage of the loan portfolio you work on is currently in default or has a waiver in place?
Which of the following actions are you seeing Lenders take or pusue in their loan portfolios?
SRS Acquiom fielded the June Barometer survey June 16-23, 2020 with a sample size of 37 representing direct lenders, investment bankers, advisors and attorneys. The May Barometer survey was fielded May 19-22, 2020 with a sample size of 53.