Ratings: 37–38Ratings Diversification | Trends in the Leveraged Lending Market
Ratings Diversification
S&P Global Ratings’ Loan & Recovery Ratings
S&P Global Ratings’ loan ratings are widely used in the loan market for credit risk assessment and pricing of syndicated loans. A loan rating is the issue-specific rating assigned to a borrower’s syndicated loan. These ratings give the market an important recovery assessment.
Recovery ratings are used in a variety of ways in the collateralized loan obligation (CLO) market. They are an integral input into S&P Global Ratings’ CLO analysis and ratings. CLO asset managers may use recovery ratings as a key consideration in trading decisions as it relates to their portfolio parameters. CLO investors may use recovery ratings to monitor the overall expected recovery of their portfolio of leveraged loans.
S&P Global Ratings has assigned ratings on syndicated loans since 1996 across different sectors and borrower types, including investment-grade, speculative-grade, infrastructure, and project-finance loans. S&P Global Ratings currently rates syndicated loans of approximately 1,750 borrowers totaling just over $2.5 trillion.(1)
Loan Ratings Process
IIn the loan ratings process, S&P Global Ratings reviews revolving lines of credit, first-lien term loans, second-lien term loans, and other subordinated debt. Leveraged loan ratings are accompanied by a full recovery rating analysis based on S&P Global Ratings’ ratings scale and methodology.
The table below illustrates how a recovery rating is used to adjust the Issuer Credit Rating, the anchor rating in the loan process, for an issuer with a speculative-grade issuer credit rating.
Note: Recovery ratings are capped in certain countries to adjust for reduced creditor recovery prospects in these jurisdictions. The table applies to 23 countries designated as Jurisdiction A by S&P Global Ratings.
Why Clients Obtain Loan Ratings |
| Efficient and transparent market pricing |
| Increased liquidity in the secondary loan market |
| Investor base broadened to new classes of lenders |
| Quick assessment of the effect of a loan rating resulting from contemplated changes to a borrower’s capital structure |
| Improved terms and efficiencies with vendors |
| Third-party, unbiased recovery assessment in a heightened regulatory and credit risk environment |
| Important consideration in the CLO market |
S&P Global Ratings’ loan ratings offer an industry-wide recognized gauge of creditworthiness
Trends in the Leveraged Lending Market
Global Leveraged Loan Volume
Loans as a Share of Leveraged Finance Issuance
Annual Speculative-Grade Term Loan Maturities Grow to Over $500 billion in 2028
Total leveraged loan issuance was approximately $774 billion globally in 2024
Note:
Data based on bank loans outstanding as of 1/1/2025. Spans corporate, financial institutions, insurance, and non-U.S. Excludes revolving bank facilities