Liquidity in leveraged loans has become scarce. A temporary solution in the form of prepayments to CLOs may be only months away, but a timely reminder has arrived that leveraged loans are only living thanks to a diet of existing liquidity from the pre-crisis years. Market participants should not panic, but complacency could be fatal.
The supply-demand dynamics of the leveraged loan market have turned 180 degrees in the past month. After six months of LBOs clearing the debt markets with flying colours, with investors desperate for deals in which to put their cash to work, there are suddenly concerns over whether the
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