Carlyle Says Coercive Deals Causing Leveraged Loan ‘Sea Change’

Leveraged loan market volatility is rising and asset quality deteriorating as risky borrowers slash debt with so-called liability management exercises, according to Carlyle Group Inc.

LMEs have become popular as companies seek out creative ways to restructure and cut their debt loads. In fact, “liability management” was mentioned 200 times in the final quarter of 2024 — a 44% increase since the pandemic roiled markets — across documents including earnings calls.

“A lot of us have trouble thinking about how debt could be taking a haircut before equity,” said Lauren Basmadjian, Carlyle’s global head of liquid credit, on ...