Uncovering Inflation, bank closures, and ongoing interest rate hikes have prompted respondents to a recent survey conducted by FTI Consulting Inc. toward “the most cautionary outlook seen in the five years that FTI Consulting has conducted the survey”, according to a press release from the company. Results indicate that 71% of those surveyed believe there will be an economic recession in 2023 or 2024 while 74% expect Federal Reserve base interest rates will continue increasing throughout 2023.
Uncovering Credit-market conditions are expected to pull back or contract this year with wider pricing spreads and restrictions on credit availability as loan underwriting standards tighten further with no expectations of loosening over the next 12 months. Loan defaults and workout activity are anticipated to be higher than 2022 levels due largely in part to prior tax lending standards and loose credit documentation terms among lenders. Respondents indicated retail would be the most likely sector for distress over the coming 12 months followed by real estate/REITs concerns being the second highest priority for lenders’ worries during this time period.
Chuck Carroll, Senior Managing Director & Leader of Senior Lender Advisory practice at FTI Consulting said “Unlike previous years, a large majority of respondents expect leveraged loan underwriting standards will be more restrictive in the year ahead… Nonetheless, lenders will have Dave Katz from the same practice adding “The responses in this year’s survey are consistent with recent dialogue we have had with our lender clients and contacts [showing] recession concerns amplified by recent bank failures.”
