In 2020, the rating agencies acted as quickly as never before in downgrading the issuer ratings due to the COVID-19 pandemic – very different to 2007/08, when rating agencies were criticized for acting too slowly. During 2020, 45% (USD 521 bn) of the loan market by par amount had received a rating downgrade from a total market size of USD 1.2 tn.
However, the flood of corporate downgrades has ebbed down and has even started to reverse. As of Q1 2021, the number of upgrades in the S&P/LSTA Leveraged Loan Index is now nearly equal to the number of downgrades. Not only are upgrades increasing, but the number of downgraded loans is also declining, providing a strong support for the loan market.