07-07-2025
Hot Junk Loan Market Hits Stumbling Blocks as Investors Feel Squeeze
A pre-summer frenzy in junk loans is seeing the market start to overheat, prompting investors to get a bit more picky about deals after spreads reached the tightest levels in years.
A rush of issuance — driven by private equity firms seeking to improve the capital structures of portfolio companies — had been met with high demand from M&A-starved investors, enabling borrowers to squeeze their interest margins by as much as 75 basis points on some offerings. But some investors are now feeling the strain. Managers of collateralized loan obligations — the biggest buyers of leveraged loans — are particularly struggling to make the numbers work.
