"What is your outlook on the markets?"
Hey guys, just a quick question on how you would answer what are your thoughts on the market and outlook? Thanks
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There’s substantial downside risk, while the economy remains strong rates have put a lid on the real estate market and we are beginning to see major institutional sponsors handing back keys on office buildings in tier 1 markets. Heavily leveraged companies are exposed if they have floating rate debt or need to roll fixed rate debt.
could you go into detail how highly lev companies are exposed if they have floating rate debt?
Imagine you went and got a loan for $100MM at SOFR plus 500bps, for simplicity’s sake we will assume no floor, no amortization and no hedges in place. SOFR went from ~.10% to ~4.5%, interest expense nearly doubled from $5.1MM to $9.5MM. Even if you have fixed rate debt, you’ll need to roll it at prevailing rates.
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