Oil shock pressures leveraged private credit borrowers — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- U.S. crude futures traded at $99.02 a barrel (WTI) and $103.64 (Brent) Friday morning, each down roughly 3.4-3.7% after sharp Thursday gains tied to escalating U.S.-Iran hostilities
- CME FedWatch priced in a near-70% chance of a Fed rate hike at the Sept. 15-16 meeting, with CPI at 3.4% and energy costs reigniting inflation concerns
- Fitch Ratings reported the U.S. private credit default rate hit a record 6.1% over the 12 months through July, underscoring the existing stress in the asset class
- Anant Kumar of Benefit Street Partners argued energy-driven inflation is a bigger threat than rate hikes alone, saying leveraged borrowers face a 'double hit' of rising input costs and floating-rate coupons
- Sunaina Sinha Haldea of Raymond James said the refinancing wall will arrive as a rolling process — stronger borrowers refinance normally while stressed credits undergo amendments, extensions, or restructurings
- Matthew Pallai of Nomura Asset Management said widespread default problems would require at least another 50-100 basis points of rate moves for lower-quality credits
Why it matters: With private credit defaults already at a record 6.1% and roughly 70% odds of a September Fed hike, leveraged borrowers with floating-rate loans priced over SOFR face simultaneous pressure from rising energy input costs and higher interest expense — the exact 'double hit' Kumar flagged — while PIMCO's Karoui noted much of the adjustment has already occurred, suggesting a near-term payment shock absent a recession.
Ask SkimNews
