FTI Consulting U.S. Loan Market Survey: Lenders Are Cautiously Optimistic for 2021, But Concerns Remain
According to the survey, which was conducted from
“The disruptive economic effects of COVID-19 in the
Key findings from the survey include:
- 52% of respondents said that loans actively managed by their workout groups were driven by COVID-19 effects, more than double the number of any other attributable cause.
- 49% of respondents believe that most Americans won’t begin to return to pre-COVID lifestyles any sooner than the first quarter of 2022. Furthermore, 47% also expect that most Americans will choose to live differently than they did pre-COVID, though bank lenders were notably more likely to believe so than non-bank lenders.
- Nearly 85% of respondents believe that temporary covenant waivers provided to borrowers in 2020 due to COVID-19 will have to be extended in 2021.
- Despite expectations of fewer loan defaults in 2021, a plurality of respondents (40%) still anticipate that loans monitored by their workout groups will increase this year.
- 58% of respondents expect another “Black Swan” event within five years, with nearly one-third saying such an event will occur within three years.
“While respondents are evenly divided over whether a return to pre-COVID lifestyles will begin in the second half of 2021 or in 2022, what is clear is that individual sector recovery speeds will vary,” said
Despite concerns over the speed and strength of the economic recovery in a post-pandemic environment, respondents strongly believe that leveraged credit market conditions will remain favorable for large corporate borrowers with respect to cost, terms, lending standards and access to capital in 2021, with few expecting credit conditions to become more restrictive this year. However, a solid majority of respondents believes that leveraged lending in 2021 will be dominated by refinancing and repricing activity rather than new money loans.
Extreme policy measures by the
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Source: FTI Consulting, Inc.