Positive Impact

Positive Impact

Leveraged loans provide over $1 trillion in financing to American companies who might not otherwise have access to financing. That capital allows companies to innovate and expand, ultimately leading to more jobs and a stronger U.S. economy.

Loans keep iconic American companies like Goodyear, American Airlines, and Dole Foods in business. In all, we estimate that companies that access the loan market for financing employ more than 7 million people and generate over $1.8 trillion in sales revenue annually.

Companies That Rely on the Leveraged Loan Market – By State

State Sales Volume Total Employees
AL 2,782,598,500 12,937
AK 2,088,410,000 4,670
AZ 32,525,220,000 145,739
AR 2,468,375,894 8,350
CA 129,856,400,000 671,628
CO 3,203,131,513 106,276
CT 29,055,402,760 162,122
DE 73,193,903,313 11,657
DC 624,393,395 1,934
FL 46,308,146,000 142,916
GA 94,387,813,700 231,338
HI 637,360,788 1,850
ID 39,323,518,030 172,300
IL 89,301,090,000 327,640
IN 13,749,038,380 46,023
IA 2,429,898,800 12,806
KS 12,707,730,000 88,864
KY 15,723,616,150 195,677
LA 70,179,704 2,172
ME 918,564,549 2,795
MD 13,729,335,440 35,119
MA 25,632,550,000 121,510
MI 179,367,250,000 348,873
MN 25,603,557,880 79,283
MS 368,032,862 460
MO 34,750,251,350 89,989
MT 0 0
NE 5,679,817,978 13,725
NV 32,700,196,850 191,155
NH 1,044,936,952 4,435
NJ 61,092,428,380 277,052
NM 0 0
NY 212,194,970,000 464,720
NC 30,619,190,170 199,922
ND 0 0
OH 73,699,978,580 357,320
OK 15,351,270,000 8,581
OR 1,165,110,000 4,476
PA 111,558,490,000 661,260
RI 2,526,100,000 11,400
SC 4,490,566,293 9,961
SD 0 0
TN 79,657,620,000 575,527
TX 258,050,050,000 774,347
UT 2,122,630,098 14,131
VT 5,066,531,000 7,900
VA 36,576,930,000 142,289
WA 26,806,358,720 68,871
WV 1,322,565 100
WI 29,455,600,000 82,400
WY 0 0
Source: ThomsonReuters LPC, Dun & Bradstreet

The majority of American companies are considered non-investment grade. Due primarily to regulations such as capital charges and leveraged lending guidance, banks are increasingly constrained from lending to non-investment grade companies. Fortunately, non-bank lenders help fill this void. Non-bank lenders (investors) include CLOs, mutual funds, insurance companies, pension funds and others. As a result, CLOs are the largest non-bank lender to companies.


Who Are the Non-Bank Lenders?

CLOs have the biggest market share

CLOs HY Funds / Hedge Funds Loan Mutual Funds Finance & Insurance Companies
Source: S&P/Capital IQ/LCD

What They Are Saying

  • “[T]he historic default rate of CLOs is under 1.5%, and the loss given default much lower than that. These are assets that withstood the stress of the financial crisis and continue to trade at or close to par.” (Testimony before the House Financial Services Committee on behalf of the U.S. Chamber of Commerce, “The Impact of the Volcker Rule on Job Creators Part 1,” January 15, 2014)

    David C. Robertson, Treasury Strategies, Inc.

    “The Barr-Scott bill’s lower risk retention requirement would significantly reduce the financial burden for managers bringing new deals to market. This would encourage new CLO issuance, thereby adding liquidity to the leveraged loan market. It would also formalize objective credit criteria for qualified CLOs, which in turn would discourage the issuance of riskier types of CLOs.”

    Lana Deharveng; Senior Analyst, Moody's
  • “Collateralized loan obligations, or CLOs, have proven to be a critical source of funding for U.S. businesses over the last 20 years.” (Floor speech during consideration of “Restoring Proven Financing For American Employers Act,” Congressional Record, p. H3258, April 29, 2014)

    U.S. Representative Andy Barr (R-KY)

    “There has to be a revisitation of the regulation that had been introduced in the past few years about Asset Backed Securities to eliminate some of the undue discriminations toward this specific product when this product is simple, real and transparent” (Jim Brunsden, Basel Pushes Risk Realism as Draghi Prepares to Buy ABS, “Bloomberg Business,” June 11, 2014)

    Mario Draghi, President of the European Central Bank
  • “CLOs are primarily used by small, midsize, or challenged businesses as a non-investment grade vehicle.” (Letter to The Honorable Andy Barr, March 10, 2014)

    R. Bruce Josten, U.S. Chamber of Commerce

    “CLOs performed extraordinarily well, yet risk retention rules don’t seem to acknowledge the fact that these securities, which performed well, helped finance more than 1200 companies that employ more than 600 million people.” (House Financial Services Committee Hearing, “The Impact of the Dodd-Frank Act and Basel III on the Fixed Income Market and Securitizations”, February 24, 2016)

    U.S. Representative Ann Wagner (R-MO)
  • “The reduced financial burden would allow less-capitalized managers to comply with the retention rules and issue new CLOs, and could allow other managers to issue a greater number of CLOs without external financing.”

    Lana Deharveng, Senior Analyst at Moody's

    “Having grown over the course of time, CLOs provide business financing to companies in 47 states and the District of Columbia that collectively employ over five million Americans. … A broad swath of corporate America participates in this market, including companies from the health care, energy, retail, entertainment, and telecommunications sectors, to name just a few.” (Testimony to the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, “The Dodd-Frank Act’s Impact on Asset-Backed Securities, February 26, 2014)

    Tom Quaadman, Center for Capital Markets Competitiveness
  • “CLOs represent a vital source of credit and remain an important financing resource for small to mid-size businesses across the country. Losing or restricting CLOs will make it not only harder to access capital, but it will make the loan process more expensive, ultimately reducing funds needed to build businesses and stifling future economic growth.” (Joe Dutra, Congress can help small Reno businesses with taxes, “Reno Gazette-Journal,” March 23, 2017)

    Joe Dutra, CEO of Kimmie Candy

    “The asset-backed market matters because it fuels lending to the real economy.” (Jody Shenn, It’s Like 2009 for Some Asset-Backed Securities Rattled by the Fed, “Bloomberg Business,” August 17, 2015)

    Jody Shenn, Bloomberg Business
  • “CLOs are products that help provide large amounts of credit to small businesses. They are debt securities, and they performed well through the greatest financial crisis of our time, and they continue to perform well.” (House Financial Services Committee Hearing, “The Impact of the Volcker Rule on Job Creators, Part II,” January 15, 2014)

    U.S. Representative David Scott (D-GA)

    “CLOs are important tools to expand credit availability.” (Rob Blackwell, Volcker Fix Leaves Some Small Banks Out in the Cold, “American Banker,” January 16, 2014)

    Jaret Seiberg, Guggenheim Securities
  • “While they may not have a high profile, CLOs provide a valuable function that our recovering economy cannot do without” (Floor speech during consideration of “Restoring Proven Financing For American Employers Act,” Congressional Record, p. H3257, April 29, 2014)

    U.S. Representative Scott Garrett (R-NJ)

    “We need a healthy leveraged loan market. The country needs it to finance capital investment.” (Glen Fest, Babson CEO Finke: CLOs Often Unfairly Judged, “Asset Securitization Report,” April 24, 2014)

    Tom Finke, Babson Capital Management
  • “[W]e should be mindful of the fact that CLOs provide financing to businesses that cannot access the debt markets affordably, if at all. For many of these companies term loan financing is their only recourse.” (Testimony before the House Financial Services Committee on behalf of the U.S. Chamber of Commerce, “The Impact of the Volcker Rule on Job Creators Part 1,” January 15, 2014)

    David Robertson, Treasury Strategies, Inc.

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