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By: Andrew Colao, Jacqueline Oveissi, Justina Chen and Kaitlin Bond from US law firm Weil LLP

The proverbial "Dry January" was not entirely dry in the U.S. leveraged loan market where market participants remain thirsty for opportunities to deploy available capital. While lackluster, activity in the U.S. leveraged loan market in the fourth quarter of 2022 and January 2023 was bolstered by a strong private credit market and record-breaking amend-and-extend activity. We expect the first half of 2023 to continue these trends, with concentrations on: (a) continued growth in the private credit markets and alternative financing structures, including preferred equity financings, (b) amend-and-extend activity to continue pushing out maturities in 2023 and 2024 and (c) transitioning interest rate benchmarks away from LIBOR in existing leveraged loans. There are also signs that the syndicated leveraged loan market is beginning to re-open following the pricing in early February of syndicated term loans backing two large buyout transactions, contributing to an overall sentiment of guarded optimism for at least the first half of 2023.

I. JANUARY 2023 TRENDS AND Q4 2022 LOOKBACK

U.S. leveraged loan issuance in 2022 totaled $850 billion, which represents a 35% drop from the record volume set in 2021 and was shaped by increased volatility, increased borrowing costs and increased risk aversion.

The U.S. leveraged loan market was slow to reopen in January 2023, durin......................

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