Brian Chappatta, Columnist

There Are No Bad Leveraged Loans, Just Bad Prices

If anything, the $1.3 trillion market seems far less scary now than earlier this year.

December 18, 2018 at 10:30 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

The price will be right eventually.
Photographer: Mary Turner/Getty Images

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Nothing gets the hyperbole going in financial markets quite like a violent sell-off, especially in an asset class that some consider doomed to fail.

The $1.3 trillion U.S. leveraged-loan market, which has drawn scrutiny from Senator Elizabeth Warren of Massachusetts, former Federal Reserve Chair Janet Yellen and BlackRock Inc., among others, is in a protracted slump. It has declined for five consecutive weeks, with investors yanking an unprecedented $2.53 billion from loan funds in the week through Dec. 12, according to Lipper data. Those sorts of withdrawals have investors like Gershon Distenfeld of AllianceBernstein LP feeling nervous. “Having outflows that are 2 to 3 percent of the market is scary. What happens if we get 10 or 15 percent?” he asked last week on Bloomberg TV.