Companies with large amounts of debt are borrowing more money at a breakneck pace, prompting the Federal Reserve to flag the trend as one potential risk in the financial system. Loans to companies with large amounts of outstanding debt — known as leveraged lending — grew by 20 percent in 2018 to $1.1 trillion, according to the Fed’s twice-annual Financial Stability Report. The share of new, large loans going to the comparatively risky borrowers now exceeds peak levels reached previously in 2007 and 2014. Defaults on these loans remain low, but the Fed warned that could change if the economy faltered. Risks associated with leveraged loans have “intensified, as a greater proportion are to borrowers with lower credit ratings and already high levels of debt,” according to the Fed report, released Monday.

Source: New York Times May 06, 2019 22:59 UTC