After 2-Month Surge, US Leveraged Loan Issuance Stalls

US leveraged loan issuance

Issuance of U.S. leveraged loans dipped sharply in July after a ferocious stretch of activity the previous two months, according to LCD.

Institutional term debt volume slumped to $29 billion last month as loan investors continued to digest the roughly $108 billion that was launched to the syndications market in May and June.

Institutional credits are term loans with little or no amortization. Because they’re somewhat riskier than amortizing term loans, which are repaid on a regular schedule, and revolving credits (together known as pro rata debt), they are more richly priced, and in greater demand to a broad swath of a growing investor base.

Year to date, U.S. institutional issuance totals $300 billion, down 9% from the same period last year, when there was a record $503 billion recorded, according to LCD.

The U.S. leveraged loan market has grown rapidly over the past few years, and earlier in 2018 topped $1 trillion in size. Because of its floating-rate nature, loans have been in demand from both institutional and retail investors of late. That demand has enabled borrowers to demand thinner spreads and notably looser loan structures, prompting concern from those involved in the market, and on the sidelines, as to how these often-hefty credits will fare once the current, long-running credit cycle turns.  – Staff reports

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