While the survey revealed optimism about a lending market rebound, the challenges of projecting revenues for the remainder of 2020 and into 2021 caused many respondents (75 percent) to forecast a loan default rate of 10 percent or more in the back half of 2020. The Carl Marks Advisors survey suggests that the economic dislocation caused by the pandemic will cause a dramatic increase in defaults for highly leveraged borrowers with non-investment grade debt.
“Unlike the 2008 financial crisis, which was very sector-specific, the COVID-19 pandemic affects nearly every area of the economy and much more deeply,” said Brian Williams, a Partner at Carl Marks Advisors. “Because of its universal impact, the vast majority of lenders are being more accommodating, with an understanding that we’re all in this together.”
Carl Marks Advisors conducted the online sentiment survey from April 16-26, 2020. In total, 117 responses were collected from financial services executives, lawyers, advisors, lenders and investors located across the United States and in a variety of industry sectors.