Unprecedented Altice France Default Causes US Leveraged Loan Default Rate Kick to 1.11% in June

Altice France’s significant default in June dramatically influenced the month’s leveraged loan issuers’ restructuring activities. This default, equating to a massive $7.65 billion in US and Euro Index loans, severely increased the default rates, according to the Morningstar LSTA US Leveraged Loan Index. Moreover, three US firms performed independent out-of-court liability management exercises.

As of June 30, the 12 months trailing default rates indicated an amount payment default rate of 1.11% and an issuer count default rate of 1.25%. A dual-track default rate, which includes index issuers conducting distressed liability management exercises (LMEs), escalated to 4.46%.

Including distressed LMEs in the calculation, which prompted a downgrade to ‘D’ or ‘SD’ last month, resulted in a combined rate with payment defaults to 4.46% in June, a slight increase from May’s 4.36%.

In a historical anomaly, LMEs and distressed exchanges have been surpassing payment defaults and bankruptcies since January 2024. Looking over the past 12 months, LMEs constituted 72% of the restructuring count.

French telecom operator Altice France S.A.’s $7.65 billion default led June’s restructuring endeavors. This default, placed into formal accelerated safeguard proceedings as of June 10, led to considerable concern and impacted both the US and Euro index loans.

Unfortunately, out-of-court restructuring actions also faltered in June. Eastman Tire Additives (Flexsys Holdings), Quest Software, and Wellness Pet conducted independent liability management exercises, each with significant debt obligations, further deepening the financial quagmire. These restructuring activities range from exchanging term loans to downgrading company and term loan ratings. A challenging financial landscape and a new climate of restructuring underscore this unique month in financial practices.