Lenders Maintain Optimism After a Banner Year for Leveraged Credit
Rhea-AI Summary
FTI Consulting (NYSE: FCN) released its 2025 Leveraged Loan Market Survey, revealing lenders' optimistic outlook for the lending environment. The survey indicates 27% of respondents expect market conditions to loosen, while 21% anticipate tightening, and 52% predict stability in credit availability and spreads.
Key findings show that Retail & Consumer Products is expected to face the most distress in 2025, followed by Real Estate/REITs and Healthcare. 50% of respondents predict increased default/workout activity compared to 2024. Competition with private credit is intensifying, with 55% of traditional lenders competing at least sometimes with private credit providers.
The survey, conducted between November-December 2024 with approximately 260 respondents, shows reduced concerns about inflation and interest rates impact (9% vs. 31% last year). Only 15% see material recession risks in the next 12 months, down from 42% in the previous year, though 53% consider declaring a soft landing premature.
Positive
- Improved lending environment outlook with 27% expecting looser conditions
- Reduced recession risk expectations (15% vs 42% last year)
- Decreased impact of inflation/interest rates on loan workouts (9% vs 31% last year)
- Strong market resilience despite gradual Fed rate cuts
Negative
- 50% of respondents expect increased default/workout activity in 2025
- Increased competition from private credit providers affecting traditional lenders
- Continued distress expected in Retail & Consumer Products sector
- Concerns about lingering inflation and expanding budget deficits
News Market Reaction – FCN
In the trading session that priced this news, FCN gained 0.11%, reflecting a mild positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
WASHINGTON, Feb. 10, 2025 (GLOBE NEWSWIRE) -- FTI Consulting, Inc. (NYSE: FCN) today announced the results of its 2025 Leveraged Loan Market Survey, which found that lenders expect a continued stable lending environment supported by easing interest rates, plentiful lending capital, slowing inflation and an improved climate for large corporate borrowers in the year ahead.
The annual survey offers insight into bank and non-bank lenders’ perspectives on the state of U.S. leveraged lending and highlights expectations for leveraged credit market conditions in the year ahead. This year’s survey found that despite a huge rally in leveraged loan markets in 2024, more respondents expect market conditions to further loosen (
“Despite the Federal Reserve’s late start to cut rates, which only began in September, and its gradual but ongoing reduction of its securities holdings, financial markets showed remarkable resilience in 2024,” said Chuck Carroll, a Senior Managing Director and Leader of the Senior Lender Advisory practice at FTI Consulting. “Surveyed lenders expressed confidence that the positive leveraged lending momentum from 2024 will carry through 2025.”
Retail & Consumer Products is the industry sector most likely to experience distress in 2025, followed by Real Estate/REITs and Healthcare, a slight reshuffling of the top three spots compared to 2024. However, respondents expressed less concern about default prospects in each of these sectors than they did last year, especially for Real Estate/REITs, while Restaurants/Dining moved into fourth place.
More key findings from the survey include:
- Loan Default Activity Will Remain Elevated: Surprisingly, a majority of respondents said new default/workout activity in the year ahead will increase slightly (
45% ) or increase substantially (5% ) compared to 2024, while just13% expect lower default activity compared to last year. - Competition with Private Credit is Picking Up: A majority (
55% ) of traditional lender respondents said they compete with private credit for deals at least some of the time, while another31% said they compete with private credit most of the time (19% ) or almost all the time (12% ). - Impact of Inflation and High Interest Rates Has Moderated: Just
9% of respondents said the impacts of high inflation/interest rates were primarily responsible for loans in workout, compared to31% in last year’s survey, while idiosyncratic and industry-driven causes were more frequently cited this year. - No Recession in the Near Term, But We’re Not Out of the Woods: Only
15% of respondents said the chances of a U.S. recession in the next 12 months were material or likely, compared to42% who had those expectations last year. However, only10% of respondents said a soft-landing scenario for the U.S. economy was “Mission Accomplished,” while a majority (53% ) said that label was a premature declaration of victory.
The survey also noted a surge in financial markets and business optimism in the United States following the election of President Trump, yet uncertainty lingers around upcoming economic policy initiatives and the impact of any unconventional policies and executive actions. Ten-year Treasury note yields are 70 basis points higher year-over-year, reflecting concerns about lingering inflation and expanding budget deficits with the administration change.
“As the impact of the new U.S. presidential administration becomes clearer, there will inevitably be winners and losers. However, for now, financial markets across the board have embraced the presidential change with enthusiasm,” said Dave Katz, a Senior Managing Director in the Senior Lender Advisory practice within the Corporate Finance & Restructuring segment at FTI Consulting. “Many survey respondents remain confident about the year ahead, but in a more subdued fashion than financial markets suggest.”
Survey Methodology
FTI Consulting surveyed large bank and non-bank lenders between November 18, 2024, and December 16, 2024, including commercial banks, investment banks, private credit platforms, CLOs and BDCs. Respondents included chief credit officers, workout group leaders, managing directors, senior vice presidents, executive directors, directors and vice presidents. The survey received approximately 260 responses, and about
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. With more than 8,300 employees located in 34 countries and territories, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. The Company generated
FTI Consulting, Inc.
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Investor Contact:
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mollie.hawkes@fticonsulting.com
Media Contact:
Matthew Bashalany
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matthew.bashalany@fticonsulting.com
