EBITDA for leveraged loan borrowers rose 9% in Q1, the strongest quarterly gain in nearly two years, driven by revenue growth and improved credit metrics.
Leveraged loan issuers reported a 9% surge in EBITDA in Q1, the highest growth rate since Q3 2022, as revenues climbed 8%, matching a peak last seen in Q4 2022. The improvement reflects stronger earnings momentum despite inflationary pressures and geopolitical risks in March.
The cohort of 160 public filers in the Morningstar LSTA US Leveraged Loan Index, representing $184 billion in par value loans, has maintained positive earnings and revenue growth since 2021. However, prior quarters saw more modest gains, averaging 2-5% from 2023 through 2025.
Credit metrics also strengthened, with average leverage dipping to 5.01x from 5.04x in the prior six months, while interest coverage rose to 4.90x, the highest since Q1 2023. Coverage remains below 2022 levels but signals improved debt servicing capacity.