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Overview
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Most EBITDA growth Q1 2023 (y-o-y)
Least EBITDA growth Q1 2023 (y-o-y)
Index
179%
78%
-33%
-33%
Air transport incl. airlines
Oilfield service
Department stores
TV and radio
Changes between the 12 months ended Sept. 30, 2022, and the 12 months ended Dec. 31, 2022.
Key takeaways
- Earning pressures were evident in the quarter as the momentum in revenue growth decelerated. However, the lower-rated ‘B’ category exhibited solid year-over-year EBITDA growth. To some extent, these entities even outperformed higher-rated ‘BB’ peers, particularly those operating in subsectors most susceptible to interest rates (homebuilders and real estate), navigating secular headwinds (TV and radio), or facing challenging comparisons (energy and commodity, retail discretionary).
- As the impact of cumulative monetary tightening takes hold, smaller and lower-rated companies face the highest ratings pressure. We found that borrowers with the smallest scale show much worse interest coverage, exacerbated by persistent free operating cash flow deficits. Their particularly weak credit measures differentiate them from larger counterparts.
- About 21% of ‘B-’ rated borrowers had EBITDA interest coverage of less than 1x in the 12 months ended on March 31, 2023.
- First-lien loans with a 30% or more debt cushion hold a significant advantage over those with a negligible or nonexistent cushion (i.e., a first-lien-only debt structure). We calculated an average gap of about 30% in our first-lien lender recovery estimate between the two. However, having a priority claim ahead of the first lien will result in an average reduction of another 2.5%.
Average first-lien recovery by available junior debt cushion
Average recovery (no priority claims)
Average recovery (behind priority claims)
Published article
346
165
317
100
143
29
89
19
50
5
Entity count
Primary credit analysts
Hanna Zhang
Hanna.Zhang@spglobal.com
Minesh Patel
minesh.patel@spglobal.com
Omkar Athalekar
omkar.athalekar@spglobal.com
Bryan Ayala
bryan.ayala@spglobal.com
Content visualization contacts
Deegant Pandya
deegant.pandya@spglobal.com
Bushra Dawawala
bushra.dawawala@spglobal.com
junior debt cushion
Junior debt cushion is definded as the amount of debt that is junior to first-lien debt as a percentage of total debt.
27 July 2023. Source: S&P Global Ratings.
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Credit trends
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Index
Median EBITDA Interest coverage (x) by entity size
12 months ended on March 31, 2023. Entity size is measured by EBITDA.
Median FOCF to debt (%) by entity size
-0.8
-6.6
12 months ended on March 31 , 2023. FOCF--Free operating cash flow. Entity size is measured by EBITDA.
Interest coverage, leverage, and FOCF trends in 2023
Median EBITDA Interest coverage (x)
Median gross leverage (x)
Median FOCF to debt (%)
12 months ended on March 31, 2023. All metrics are as reported in financial statements and without any adjustment from S&P Global Ratings.
12 months ended on March 31, 2023. All metrics are as reported in financial statements and without any adjustment from S&P Global Ratings.
FOCF--Free operating cash flow. 12 months ended on March 31, 2023. All metrics are as reported in financial statements and without any adjustment from S&P Global Ratings.
27 July 2023. Source: S&P Global Ratings.