- The loan market moved directionally with broader risk markets this week, as concerns around the delta variant created a more volatile environment, particularly in the early part of the week. The S&P/LSTA Leveraged Loan Index (the “Index”) lost five bps for the seven days ended July 22, led lower by a 12 bps reduction in the average Index bid price.
- In the primary market, arrangers syndicated another $13.9 billion of new-issue loans. In terms of proceeds, M&A activity remained the primary driver, while recapitalizations also provided a boost this week, representing roughly 30% of the entire volume. The forward calendar contracted a bit, as expected supply outpaced repayments by about $6.0 billion, as compared to $9.4 billion in the prior estimate.
- The secondary market saw some softness this week, most of which occurred on Monday’s volatile trading day. CCCs were disproportionately impacted and have lagged higher quality in July.
- In the CLO space, managers printed four new vehicles, bringing MTD and YTD levels to $4.3 billion and $86.7 billion, respectively. Meanwhile, retail loan funds experienced a small outflow of $67 million for the five business days ended July 21 (per Lipper), ending the streak of 27 consecutive weeks of inflows.
- There were no defaults in the Index this week.
Source: S&P/LCD, S&P/LSTA Leveraged Loan Index and S&P Global Market Intelligence. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index.
Unless otherwise noted, the source for all data in this report is Standard & Poor’s/LCD. S&P/LCD does not make any representations or warranties as to the completeness, accuracy or sufficiency of the data in this report.
1. Assumes 3 Year Maturity. Three-year maturity assumption: (i) all loans pay off at par in 3 years, (ii) discount from par is amortized evenly over the 3 years as additional spread, and (iii) no other principal payments during the 3 years. Discounted spread is calculated based upon the current bid price, not on par. Please note that Index yield data is only available on a lagging basis, thus the data demonstrated is as of July 16, 2021.
2. Excludes facilities that are currently in default.
3. Comprises all loans, including those not tracked in the LPC mark-to-market service. Vast majority are institutional tranches. Issuer default rate is calculated as the number of defaults over the last twelve months divided by the number of issuers in the Index at the beginning of the twelve-month period. Principal default rate is calculated as the amount defaulted over the last twelve months divided by the amount outstanding at the beginning of the twelve-month period.
General Risks for Floating Rate Senior Loans: Floating rate senior loans involve certain risks. Below investment grade assets carry a higher than normal risk that borrowers may default in the timely payment of principal and interest on their loans, which would likely cause the value of the investment to decrease. Changes in short-term market interest rates will directly affect the yield on investments in floating rate senior loans. If such rates fall, the investment’s yield will also fall. If interest rate spreads on loans decline in general, the yield on such loans will fall and the value of such loans may decrease. When short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on senior loans, the impact of rising rates will be delayed to the extent of such lag. Because of the limited secondary market for floating rate senior loans, the ability to sell these loans in a timely fashion and/or at a favorable price may be limited. An increase or decrease in the demand for loans may adversely affect the loans.
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Past performance is no guarantee of future results.