Leveraged-loan pinch seen lasting in 2015 amid Fed scrutiny

New York

THE biggest underwriters of leveraged loans for US companies are preparing for a second straight year of declining volumes as regulators resolve to improve standards of the high-yield, high-risk debt. The top five banks that arrange the financings and sell pieces to institutional investors such as mutual funds see sales falling, with Barclays plc and Deutsche Bank AG forecasting as little as US$325 billion. That would be down from more than US$515 billion issued in 2014 and the first back-to-back annual drop since 2009, according to Bloomberg data.

Pressure from the Federal Reserve and the Office of the Comptroller of the Currency (OCC) on banks to tighten lending standards is rising amid concern that speculative-grade companies are adding too much debt based on overly optimistic assumptions.