🔥En Fuego🔥
Spruce Power Holding Corporation ($SPRU), Linqto Texas LLC, Traeger Inc. ($COOK) and Exactech Inc.
Well, as anticipated by the market, the Fed lowered the Fed Funds Rate by 25 bps and foreshadowed additional cuts prior to year end. And, as predicted by us …
… the Fed downplayed recent inflation readings and pinned the move on sluggish labor signals.
Notably, a mere 24 hours after securing his new seat as Fed Governor, President Trump’s appointee Stephen Miran offered the sole dissent to the Fed’s decision, indicating that he would have gone big league for 50 bps — a totally …
… independent …
… conclusion.
Because the Fed plot ultimately lacked drama — as we noted Wednesday, the Fed hasn’t strayed from market predictions since the Great Financial Crisis — we watched with dopamine-fueled interest as the Trump administration seemed to (indirectly) Ned Stark (verb) Jimmy Kimmel, stirring up all kinds of uproar. We won’t make the mistake of delving into that political morass but for all of the talk of the “end of free speech” and “the end of democracy” … both … *checks notes* … decidedly baaaaad things … the market gave literally zero f*cks about any of it: the S&P 500 closed up nearly 1% on the week.
The S&P may be headed up ⬆️ but, according to Fitch Ratings (“Fitch”), the leveraged loan default rate is going in the opposite direction; it was down in August — explaining robust attendance at RX-affiliated charity events over the past week, 😉. The TTM default rate dipped from 5.2% in July to 4.8% (in contrast, the TTM default rate for high yield bonds rose from 3.0% to 3.3%). Per Fitch:
“[Distressed debt exchanges] accounted for 64% of August’s defaults, Chapter 11 filings for 28%, with the balance coming from a missed payment by Anastasia Beverly Hills. This is a continuation of the trend that began in 2024, with out-of-court restructurings constituting most of the defaults.”
Don’t go expecting TPG’s Anastasia Beverly Hills (and its $650mm term loan) to add to that chapter 11 percentage; it’s highly likely to stay out of court too.
While we’re on the topic, it’s worth noting that the leveraged loan market is en fuego 🔥.
New term loan spreads at the B/B+ level are at S+285 …