Wacky Tobaccy, and the Debt Refi Cliff

One of the favorite scare stories in capital markets has to do with the refinancing cliff faced by many debtors who need to roll over loans in the next few years. Much of that debt was driven by the wacky-tobaccy of the collateralized loan obligation (CLO) market, which has mostly gone pfffft. The result? The following scary refi schedule into 2016, with $770-billion in leveraged loans coming due in the next five years (according to Fitch), and no CLO market to replace it:


But here is the thing. Markets, like nature in Jurassic Park, sometimes find a way. Just because the CLO market has gone pffft doesn’t mean that all these companies needing to roll over wacky-tobaccy debt won’t be able to avoid doing synchronized default. It will be a bit of this, a bit of that, including defaults, but there is a decent chance that the refi cliff looks less like a precipice for debtors than like a 30-degree slope near the summit of Mammoth Mountain — there are rocks, chutes and other stuff, but it’s navigable with skill and some luck.