The warnings are coming more frequently. The impending crash is not coming in the dark of the night.
When an expert in financial risk at one of the world’s most powerful private equity outfits tells investors to scale down their exposure to a specific corner of the debt market, it is worth taking notice.Henry McVey, who sits on the risk committee at KKR, said last week that the leveraged loan market – a $1.3tn (£1tn) pile of risky corporate loans – had been on a “great run in recent years” but the firm was now cutting its exposure to the asset class to zero.McVey is not alone in his caution. A growing chorus of global leaders spent 2018 warning that the leveraged loan mountain was getting dangerously large and inviting comparisons with the financial crisis a decade ago.The Bank of England, Australia’s central bank, the International Monetary Fund and members of the US Federal Reserve have raised red flags over so-called leveraged loans, which are offered to companies already in debt but often come with few strings attached.
Source: The sub-prime timebomb is back – this time companies are lighting the fuse | Business | The Guardian