Leveraged Loan Issuers Maintain Strong Earnings Growth Amid Rising Financing Costs
Leveraged loan issuers continued to show strong earnings growth in the second quarter of 2026, with revenue and EBITDA both rising by 8% and 9%, respectively. These figures matched their first-quarter performance and marked the highest levels since early 2022. Despite a more expensive financing environment, borrowers maintained solid leverage ratios and interest coverage metrics that eased concerns about credit stress. Average debt-to-EBITDA leverage decreased slightly to 4.85x in Q2 from 5.01x in Q1 but remained higher than the previous year's level of 5.08x. Interest coverage improved, with earnings covering interest expenses by an average of 4.95 times — a record high since early 2023 and up significantly compared to last year. Even after accounting for capital expenditures related to AI investments and other disruptions, cash flow remained strong enough to cover interest costs at around 3.49x on average. While some borrowers still operated with higher leverage levels (over 7x debt/EBITDA), the proportion of such cases held steady at 17%, below pandemic-era peaks.
Topics: Credit Risk EBITDA Growth Interest Coverage Leveraged Loans Revenue Growth