High Yield & Loan Strategy: LevFin earnings - AI alignment in the driver’s seat

Research evidence excerpt

High Yield & Loan Strategy: LevFin earnings - AI alignment in the driver’s seat

demand remained Market Recap: EUR Loans 25

subdued amid affordability constraints, weak consumer confidence, and a cautious Glossary 28

buying environment. Commodity chemicals also saw flat growth amid pricing pressure

and weaker volumes. Comparing LevFin vs. Russel 2000, we also see performance

dispersion in Gaming due to different subsector exposure, as well as in Packaging due to Neha Khoda

Credit Strategist

idiosyncratic closure of business lines of certain companies. BofAS

+1 646 855 9656

BDC portfolios drift weaker, but liquidity runway intact neha.khoda@bofa.com

Dong Ba

Q1 results reflect broad credit deterioration across the BDC complex. Public BDC non- Credit Strategist

accruals rose to 3.0% from 2.5% QoQ, while pvt BDCs also worsened. Portfolio BofAS

+1 646 855 7118

fundamentals were weaker, with platforms reporting higher levels EBITDA contraction dong.ba@bofa.com

than growth, stable to rising leverage, and uneven coverage metrics. That said, our Adam Vogel

liquidity stress tests indicate that pvt. BDCs have a median liquidity runway of 3-4 Credit Strategist BofAS

quarters before potential downgrades to their unsecured bonds begin. But dispersion +1 646 855 6902

remains high, with weaker platforms 1-2 quarters away from potential downgrades. In adam.vogel@bofa.com

addition, while liquidity is currently manageable, it will become credit-relevant once Elizabeth M. Han Credit Strategist

illiquid portfolios need to be sold. BofAS

+1 646 855 6599

HY and Loan Weekly Recap elizabeth.han@bofa.com

HY spreads widened 4bps, leaving TR flat. CCCs lagged (-0.15%); BBs outperformed

(+0.05%). Issuance totaled $13.3bn, primarily BBs ($8.3bn) and refis (62%). Expect softer