The 2024 loan boom
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The Fed hasn't cut rates yet, but in the first half of this year, the riskiest U.S. companies slashed the interest they're paying on more than half a trillion dollars in loans.
Why it matters: The huge investor demand for debt has driven rates down, granting welcome relief to borrowers who were shocked in 2022 by the speed with which their floating-rate loans became much more expensive to service than they'd anticipated.
How it works: Borrowers with expensive debt can refinance it into cheaper debt — or they can simply approach their existing lenders and ask them to reprice the outstanding loans.
- Those lenders are likely to sign onto the so-called repricing if they know the borrower could easily refinance at a lower rate elsewhere.
By the numbers: Refinancings and repricings of below-investment-grade corporate loans totaled $556 billion in the first half of 2024, up from $71 billion in 2023 and just $42 billion in 2022.
- Add in new loans, and the loan market has reached "a fever pitch" of $736 billion in first-half activity this year, per Pitchbook LCD, up from less than $200 billion in the same period of 2022 and 2023.
- That number obliterates the previous first-half record of $584 billion set in 2017.
Follow the money: The average borrower is saving 0.54 percentage points in interest costs every year — which means $2.2 billion of annual interest savings overall.
Between the lines: One reason for the repricing activity is that very few companies are showing much interest in taking out new loans.
- Non-refinancing issuance was barely over $110 billion in the first half, not nearly enough to keep up with demand from big loan investors.
What's next: This breakneck pace will probably continue for at least the next several months, as borrowers try to squeeze in deals before an election that could inject uncertainty into the market.
