U.S. loan default forecast for 2023 rises

Amid increasing economic turmoil, Fitch Ratings has raised its forecast for U.S. loan defaults in 2023.

The rating agency boosted its default forecast for U.S. institutional leveraged loans by 25 basis points to a range of 1.5% to 2% for 2023.

“The increase reflects recessionary concerns and a rise in the ‘market concern loans’ total since the end of the first quarter,” it said.

“Our projected 2023 rate equates to the third highest yearly loan default volume ever, although still well below the totals in 2009 and 2020,” said Eric Rosenthal, senior director at Fitch, in a release.

“Building materials, leisure/entertainment, retail and healthcare/pharmaceutical could finish with default rates above our 1.5%-2% forecast,” he added.

The rating agency also said that the 2024 default rate could rise to 2% or more, if the challenging economic backdrop hits credits.

Fitch’s default rate forecast for 2022 remains unchanged at 1.5%. Year-to-date, the default rate is just 0.6%.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.