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LCD’s estimate of loan fund flows (8/27): -$111M Lipper/-$156M total

On Thursday, Aug. 27, outflows from loan mutual funds totaled an estimated $111 million based on the Lipper FMI universe of weekly reporters, or $156 million based on the total universe of open-ended funds plus ETFs, versus outflows of $113 million/$143 million on Wednesday, Aug. 26.

For the five business days ended Aug. 27, outflows totaled $933 million (Lipper FMI universe) and $1.21 billion (total universe plus ETFs), versus outflows of $783 million/$979 million during the five business days ended Aug. 20.

Methodology:

LCD compiles these data with the cooperation of a number of mutual-fund complexes. LCD is collecting daily fund-flow data for a representative sample of loan funds. We then take the weighted average AUM change each day from contributors and extrapolate it to:

  • the Lipper FMI AUM universe of $83.9 billion (as of Aug. 26) to provide a “Lipper-style” daily reading of inflows/outflows, and
  • the entire open-ended loan universe of $117 billion to give a fuller view of estimated inflows/outflows.
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US leveraged loan funds see $745M investor cash withdrawal

loan fund outflows

Leveraged loan funds reported the largest one-week net outflow in 32 weeks, at $745 million, for the week ended Aug. 12, according to Lipper. The outflow builds heavily on last week’s $594 million withdrawal, and puts a three-week outflow total to $1.4 billion.

This week’s result reflects a 24% influence from the ETF segment, or a $179 million withdrawal from that sector, versus an inverse influence last week. Indeed, last week there was a $598 million withdrawal from mutual funds, filled back in with a $4 million flow to the ETF segment, or a negative 1% correlation.

With today’s net outflow, the trailing four-week average falls deeper into the red, at negative $286 million per week, from negative $91 million last week and positive $62 million two weeks ago. The current observation is the deepest reading in seven weeks.

The year-to-date outflow deepens to $5.2 billion, with 5% tied to ETFs, versus an outflow of $2.2 billion at this point last year, that reflected outflows of $2.7 billion from mutual funds countered by $505 million of inflows to ETFs.

In today’s report, the change due to market conditions was negative $525 million, roughly 0.6% against total assets, which were $91.3 billion at the end of the observation period. The ETF segment comprises $6.6 billion of the total, or approximately 7% of the sum. – Staff reports

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Loan bids post fourth consecutive drop amid outflows, slowing CLO issuance

The average bid of LCD’s flow-name composite fell 11 bps in today’s reading to 98.78% of par, from 98.89 on Tuesday, Aug. 11.

Among the 15 names in the sample, eight declined, three advanced, and four were unchanged from the prior reading. Avaya’s B-7 term loan due 2020 (L+525, 1% floor) was once again the biggest mover in either direction, falling another point in today’s reading to an 88.5 bid, extending losses on its 3Q results released last week amid the volatile market conditions.

After losses deepened Wednesday morning, loans began clawing back losses yesterday afternoon, with the recovery continuing today, as some buyers stepped in to capitalize on the recent weakness.

Overall, the market has had a slightly negative bias in recent sessions with loan mutual funds recording outflows and CLO issuance slowing, while traders also say that some high-yield and crossover accounts have been selling loans amid the recent downdraft in high-yield. Lipper last week reported an outflow of $594 million, the largest in 26 weeks, and the market appears poised for an even more considerable outflow this week. LCD data project an outflow, per the Lipper sample of weekly reporters, of $775 million for the five days ended Aug. 12.

With prices well off recent highs – the percentage of performing Index loans bid at par or higher fell to 23.1% as of yesterday’s close, from 40.6% a week earlier and 54% three weeks ago – some accounts are viewing the recent weakness as a buying opportunity, and there’s speculation that today’s relative bargains could revive the lackluster CLO issuance as of late. Regardless, buyers began coming out of the woodwork.

Nevertheless, this recent secondary weakness has bled into the primary market. While there’s ample demand to get deals done, issuers and arrangers can’t be as aggressive as they might have been a week ago, especially with a few recently issued deals that cleared tight relative to their ratings profiles bid below their issue prices, such as Pharmaceutical Product Development and HD Supply.

With the average loan bid tumbling 11 bps, the average spread to maturity gained two basis points, to L+415.

By ratings, here’s how bids and the discounted spreads stand:

  • 99.63/L+367 to a four-year call for the nine flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+365.
  • 97.52/L+499 for the six loans rated B or lower by one of the agencies; STM in this category is L+474.

Loans vs. bonds
The average bid of LCD’s flow-name high-yield bonds dropped 40 bps, to 97.47% of par, yielding 7.48%, from 97.87 on Aug 11. The gap between the bond yield and discounted loan yield to maturity stands at 327 bps. – Staff reports

To-date numbers

  • August: The average flow-name loan fell 87 bps from the final July reading of 99.65.
  • Year to date: The average flow-name loan rose 186 bps from the final 2014 reading of 96.92.

Loan data

  • Bids decrease: The average bid of the 15 flow names slipped 11 bps, to 98.78% of par.
  • Bid/ask spread expand: The average bid/ask spread grew, to 38 bps.
  • Spreads higher: The average spread to maturity – based on axe levels and stated amortization schedules – inched up two basis points, to L+415.
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Leveraged loan funds report third consecutive week of inflows

Leveraged loan funds reported inflows of $208 million for the week ended July 22, following inflows of $34 million and $19 million in the previous two weeks, which reversed a five-week outflow streak worth a combined $1.2 billion, according to Lipper.

This week’s result was attributed to a $168 million inflow to mutual funds, along with a $40 million inflow to the ETF segment. In contrast, last week’s $34 million inflow came from a $37 million inflow to ETFs offset by a $3 million outflow from mutual funds.

With today’s net inflow, the trailing four-week average improves to negative $26 million, from negative $122 million last week and negative $208 million two weeks ago.

The year-to-date outflow is now $3.9 billion, with 2% tied to ETFs, versus an inflow of $352 million at this point last year that was roughly 216% tied to ETFs.

In today’s report, the change due to market conditions was negative $98.5 million, which is essentially nil against total assets, which were $93.3 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 7% of the sum. – Joy Ferguson

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Leveraged loan fund assets under management hit two-year low

loan fund assets under management

After eking out two months of growth, loan mutual funds’ assets under management declined $2.9 billion in June – the biggest drop since January – to a two-year low of $135.6 billion, from $138.5 billion a month earlier, according to data from Lipper FMI and fund filings.

The reason? institutional investors in June adopted a low-wattage risk-off posture across risk assets, amid growing tensions surrounding the Greek debt situation. (Early data from July suggests that loan fund assets are stabilizing.) – Steve Miller

Follow Steve on Twitter for leveraged loan market news and analysis.

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US Leveraged loan funds see second straight investor cash inflow

leveraged loan fund flows

Loan funds reported inflows of $34 million for the week ended July 15, following an inflow of $19 million last week, which itself reversed a five-week outflow streak worth a combined $1.2 billion, according to Lipper.

However, take note that the small inflow this week was attributed to $3 million outflow from mutual funds filled in by an inflow of $37 million to the ETF segment. In contrast, last week’s net inflow was one third mutual fund and two thirds ETF.

With today’s net inflow, the trailing four-week average is now negative $122 million, versus negative $268 million last week and negative $208 million two weeks ago.

The year-to-date outflow remains at $4.1 billion, with 3% tied to ETFs, versus an inflow of $765 million at this point last year that was roughly 100% tied to ETFs.

In today’s report, the change due to market conditions was positive $215 million, which is essentially nil against total assets, which were $93.2 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 7% of the sum. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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High yield bond prices rebound after two-week slump

The average bid of LCD’s flow-name high-yield bonds advanced 49 bps in today’s reading, to 99.92% of par, yielding 6.71%, from 99.43% of par, yielding 6.89%, on July 9. Gains were broad based within the sample, with 11 on higher ground against three unchanged and one decliner.

Today’s positive observation is the first gain after a two-week slump. It wipes out Thursday’s 16 bps decrease, for a net gain of 33 bps week over week, but with the recent losses, the average is negative 80 bps over the past two weeks and negative 72 bps in the trailing-four-week reading.

The rebound comes alongside modest equity market gains since Greece’s deal over the weekend. However, it’s been fairly tenuous in high-yield as participants continue to keep an eye on U.S. Treasury rates and commodity prices.

The average bid sits at positive 422 bps for the year to date.

Recall that prior to sample revisions at the start of the year, the average bid had plunged to a three-year low of 93.33 on Dec. 16. However, a snap-back rally followed, and the average bid closed the year at 96.4, for a total loss of 536 bps in 2014.

With today’s increase in the average bid price, the average yield to worst slipped 18 bps, to 6.71%, but the average option-adjusted spread to worst cinched inward by 29 bps, to T+506. The greater move in spread as compared to yield can be linked to the weakness in the Treasury market of late, as rising yield encourages spread-to-Treasury compression.

Today’s reading in the flow names is wider than with broad index yield, but fairly in line with spread. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed yesterday with a 6.4% yield to worst and an option-adjusted spread to worst of T+484.

For further reference, take note that a June 24, 2014 reading of 106.98 – close to the February 2014 market peak of 107.03 – had the flow-name bond average yield at 5.02%, an all-time low, but spreads weren’t quite there. Indeed, the average yield was 7.63% at the prior-cycle peak in 2007, and the average spread at the time was T+290.

 

Bonds vs. loans
The average bid of LCD’s flow-name loans increased 19 bps in today’s reading, to 99.82% of par, for a discounted loan yield of 4.13%. The gap between the bond yield and discounted loan yield to maturity stands at 258 bps. – Staff reports

The data:

  • Bids rise: The average bid of the 15 flow names advanced 49 bps, to 99.92.
  • Yields fall: The average yield to worst slipped 18 bps, to 6.71%.
  • Spreads tighten: The average spread to U.S. Treasuries cinched inward by 29 bps, to T+506.
  • Gainers: The largest of the 11 gainers, Dish Network 5.875% notes due 2022, added two full points, to 100.75.
  • Decliners: The lone decliner, Intelsat 7.75% notes due 2021, shed 1.5 points, to 79.5.
  • Unchanged: Three of the 15 constituents were unchanged.

 

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Middle-market company revenue up in 1st two months of 2Q, index says

Revenue of privately held middle-market companies rose 9.26% in the first two months of the second quarter of 2015, outpacing revenue growth of 7.24% in the first quarter, according to an index created by Golub Capital and credit market expert Ed Altman.

EBITDA increased by 6.93% year-over-year during the first two months of the second quarter of 2015, compared to 6.42% in the first quarter. The Golub Capital Altman Index is based on the sales and earnings data of roughly 150 private U.S. companies in Golub Capital’s loan portfolio.

The index was featured in the inaugural edition of the quarterly Golub Capital Middle Market Report, which includes an analysis of the index. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

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Loan outflows continue for fifth week, led again by mutual funds

Loan funds reported outflows of $365 million for the week ended July 1, more than double the $174 million of outflows for the week ended June 24, according to Lipper. It was the fifth straight week of outflows for a combined $1.2 billion, which follows a stretch of three consecutive weeks of inflows that totaled $442 million.

Mutual funds again provided the majority of the latest outflow, at $271 million, compared to $93 million of ETF outflows. Last week, mutual funds reported outflows of $151 million, joined by $23 million in ETF outflows.

With today’s outflow, the trailing four-week average widens to negative $268 million, from negative $201 million last week, and negative $147 million two weeks ago.

The year-to-date outflow is $4.1 billion, with 4% tied to ETFs, versus an inflow of $1.2 billion at this point last year, with positive 70% tied to ETFs.

In today’s report, the change due to market conditions was $98 million, or roughly 0.11% against total assets, which were $93 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 7% of the sum. – Joy Ferguson

Loan Fund Flows July 6 2015

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With all eyes on Greece, Leveraged loans lose 0.42% in June; 1st setback of 2015

leveraged loan returns

 

In June, S&P/LSTA Index returns slipped into the red, at negative 0.42%, amid heavier conditions that prevailed for most of the month and recent concerns surrounding Greece that put pressure on all risk assets.

It was the first monthly setback of the year and followed a 0.19% gain in May. The largest loans that constitute the S&P/LSTA Loan 100 lagged the broader market with a 0.86% loss in June.

This group suffered disproportionately from Millennium Health’s outsized decline and from falling prices in the market’s two big distressed situations: Energy Future Holdings and Caesars. – Steve Miller

Follow Steve on Twitter for leveraged loan news and insights.