Eleven issuers across eight different sectors defaulted on their loan debt in first quarter, for a total volume of $4.8 billion, according to the latest data from Thomson Reuters LPC.

Telecom, technology and media default rates plunged to a multi-year low of 1.2% in 1Q due to the roll-off of iHeart Media's $6.3 billion debt volume, a result of its March 2018 Chapter 11 filing.

However telecommunications remained in the top three sectors that defaulted on institutional leveraged loan debt, along with Banking and Finance, and Retail. In 2018, the top three sectors were Broadcast & Media, Energy and Retail; and in 2017, the top three sectors were Energy, Retail and Telecom.

Second lien activity increased in the first quarter to a record $10.71 billion, up from $7.6 billion in the last quarter of 2018. This is the highest level since the third quarter of 2017. Year over year second lien activity increased $1.47 billion.

Meanwhile the brick and mortar retail sector continues to get hammered thanks to rising debt and competition from online outlets. The list of Retail and Supermarket companies with loan debt trading at distressed levels includes many household names like 99 Cents Only Stores, Academy Sports & Outdoors, FULLBEAUTY Brands Inc., J Crew Group Inc.

At the end of the first quarter, the top sectors of defaulted loans held within active CLOs on a volume basis are Healthcare, Telecommunications and Financial Services. 

Within the underlying loans of all active U.S. CLOs as of the end of March 2019, the sectors with the largest percentage of defaulted loans, by total loan position, are Textiles and Apparel, Construction and Real Estate.

However, lender optimism remains largely intact. Survey results reveal little expectation of a recession this year and lenders are optimistic that the downturn, when it occurs, will be shorter than in the previous cycle, according to LPC.

The March 2019 Distressed Market Review can be viewed here (PowerPoint).