A financial stream that helped fund the world's riskiest companies and grew into a market estimated at $1.5 trillion in the low interest rate years is drying up, as aggressive rate hikes bring tougher borrowing conditions and uncertainty.
of U.S. retailer Bed Bath & Beyond expose cracks in business models that were previously insulated by abundant money supply and low rates, analysts said.
A "downside risk," she said, would be "the lack of funding at an affordable level," for weak cashflow borrowers whose existing loans are due for refinancing. "You've got more risk now and you want to be compensated for that risk," said Aza Teeuwen, portfolio manager at fixed income specialist asset manager TwentyFour.
S&P calculates that while CLO equity investors were able to get a 15% annual return before 2022, deals priced now would offer about 7%.
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