Plate/GCGC - Weekly Newsletter - 12/5/23 - GLOBAL CREDIT OUTLOOK 2024 Summary & Download
Siva Pillarisetty
Marketing Manager in the USA at Golden Crown USA, Inc. - International Project Funding
According to S & P Global: An environment of increasingly rapid change, which began with the onset of the global COVID-19 pandemic, requires financial market participants to adapt their playbooks. Conditions that borrowers and investors could safely take for granted for a decade or more have been pushed aside. Most importantly, perhaps, is that markets can no longer expect ultra-accommodative monetary policy and low inflation will be the norm.
While still-robust employment levels and supportive fiscal conditions should continue to underpin the resilience of stronger credits, we expect 2024 to come with additional credit deterioration and defaults for more vulnerable corporate and government issuers.
Borrowers across all asset classes will need to adjust to tighter financing conditions and softer economic growth. While long-term yields will likely peak around midyear, financing conditions will likely stay tight in real terms in 2024. Borrowers have reduced near-term maturities, but the share of speculative-grade debt coming due rises significantly in 2025, making 2024 a pivotal year. Defaults will likely rise further, to 5% in the U.S. and 3.75% in Europe, above their long-term historical trends.
We expect additional credit deterioration in 2024, largely at the lower end of the ratings scale, where close to 40% of credits are at risk of downgrades. Sectors exposed to a decline in consumer spending are most vulnerable. Meanwhile, investment-grade credits should generally continue to show resilience despite some margin compression—with the exception of the real estate sector.
The main risks that could derail our baseline expectations, leading to further credit deterioration, include persistent tight financing conditions amid entrenched inflation; a sharper-than-expected slowdown in global growth; elevated input-cost inflation and high energy prices that squeeze corporate profits and pressure governments’ fiscal balances; vulnerable commercial real estate; and amplifying geopolitical tensions.
Looking ahead, heightened geopolitical risks, the need to accelerate the decarbonization of the economy to address the rise in climate-related risks, and the technology revolution will increasingly shape the future of credit.
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At Plate we are still funding as usual in 2024. All good here!
Plate Company's financial partner is an institution that owns 30 banks that mandated us as their official representative(Underwriter). We handle everything from start to finish for them such as intake, pre underwriting, onsite visit & due diligence, underwriting, closing, funding, loan monitoring, auditing, servicing, etc. The mandate is a contract/license they issued us to do this work for them. We are not a broker, capital is in place, and are the funding.
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