Professor Edward Altman Forecasts End of Benign Credit Cycle and Heightened Risk of Stressed Economic and Credit Environment

Findings are part of analysis published by the Creditor Rights Coalition

NEW YORK, April 12, 2023 /PRNewswire/ -- Professor Edward Altman, one of the foremost experts on the credit market, published an article with the Creditor Rights Coalition on the current credit environment and how it may evolve over the near- and mid-term.

Professor Altman, who invented the Altman-Z-Score model for bankruptcy prediction, concludes that "the Benign credit cycle we have enjoyed since 2010, with the exception of a few months in early 2020, is over." 

Professor Altman forecasts a reversion to the mean of 3.5% in terms of defaults, with recoveries similarly trending to the mean of 45%. His analysis finds that liquidity in leveraged finance markets is "extremely important, but illusively forecastable" and expects 2023 to be a year of limited new issuance in leveraged finance compared to the historic mean with bank and non-bank lenders tightening credit availability as well.

Based on these factors, Professor Altman believes there is a "strong likelihood that the U.S. credit picture will continue its heightened risk trend toward a Stressed scenario by year's end." Furthermore, following a review of the historical relationship between the credit cycle and the business cycle he does not rule out a more dire scenario in the event of a "hard-landing." In that scenario, "we could witness another financial-credit crisis, with non-financial corporate risky debt default rates rising to perhaps 10%, or more, over one or two years," according to Professor Altman's research.

"The Creditor Rights Coalition is excited to partner with renowned expert Professor Altman to publish his views on where are in the credit cycle. As the cycle turns, it becomes even more important for all market participants to be aware of the latest developments related to creditor rights and, where appropriate, engage on these matters to improve the market for all stakeholders. We look forward to playing a positive role in that process and continuing to provide timely and original content to our readers to help them stay informed," added Daniel Kamensky, Board Member of the Creditor Rights Coalition.  

The full article can be found on the Creditor Rights Coalition website at https://creditorcoalition.org/special-feature-professor-ed-altman-on-where-we-are-in-the-credit-cycle/.  

About the Author 

Dr. Altman is the Max L. Heine, Emeritus Professor of Finance at the NYU Stern School of Business and Director of the Salomon Center's Credit and Debt Market Research Program.  Dr. Altman has an international reputation as an expert on corporate bankruptcy, high yield bonds, distressed debt and credit risk analysis. He is the creator of the well-known Altman-Z-Score model for bankruptcy prediction of companies globally.

About the Creditor Rights Coalition 

The Creditor Rights Coalition is a nonprofit association established to serve as the leading voice representing all stakeholders with an interest in protecting creditor rights. The Coalition promotes transparency, accountability and equality to ensure fair and robust stakeholder participation in bankruptcy proceedings by engaging in thought-leadership and advocacy. The Coalition is a primary source of educational content for practitioners, academics, and market participants through feature content. The organization also convenes industry leaders, academics and stakeholders at events including its annual Restructuring Symposium hosted in partnership with the Loan Syndications and Trading Association. More information about the Coalition can be found at www.creditorcoalition.org. 

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SOURCE Creditor Rights Coalition