One Third of US Leveraged Loans Sold in 2021 Are High-Risk, Reports Say

© Photo : PixabayAn iPhone placed next to packs of US dollar banknotes
An iPhone placed next to packs of US dollar banknotes - Sputnik International, 1920, 16.12.2021
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MOSCOW (Sputnik) - A third of leveraged loans sold to investors in the US debt market in 2021 were issued to companies that borrowed above the recommended limit, the Financial Times reported Thursday.
A record 33% of the 954 high-risk loans issued by the end of November had a debt-to-earnings ratio of more than six, above the threshold set by US financial regulators in 2013.
The debt burden of this magnitude raises concerns for most industries, the newspaper reported. Fears are that if the US economy shrinks or borrowing rates increase it could become unmanageable and accelerate the decline of indebted business, according to the FT.
Dennis Kelleher, the president of the Better Markets group that advocates for stricter Wall Street oversight, told FT that the amount of leverage in the US financial system was "insane."
"It has created a ticking time bomb," he was quoted as saying.
The computer and electronics industry now makes up the largest share of leveraged loans — more than 20% of the market, up from 13% in 2013. The services and leasing sector is also heavily indebted.
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