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Issuer’s market: Covenant-lite loan volume nears all-time record

Covenant-lite loan volume in the U.S. so far in 2013 has topped levels seen during all of 2012, and is fast approaching the full-year record set in the pre-Lehman market of 2007, according to S&P Capital IQ/LCD.

Year-to-date cov-lite loan volume stands at $93.5 billion, as issuers and private equity firms rush to take advantage of an accommodating institutional investor market that is sitting atop a seemingly ever-growing mountain of cash.

The full-year covenant-lite loan total for 2012 was $86.7 billion. The record annual volume is $96.6 billion, in 2007.

About that investor cash. Net inflows into loan mutual funds and ETFs have totaled nearly $16 billion so far this year, riding a 44-week streak of inflows, according to Lipper FMI. CLOs have played a major role here, as issuance in that market has boomed so far in 2013 after being left for dead after the 2008-09 financial markets collapse.

While cov-lite activity is eye-popping – these deals comprise more than half of all first-lien leveraged loans completed so far this year – it should be noted that the bulk of loan market activity in 2013 has been straightforward repricings/refinancings, as opposed to more high profile M&A/LBO deals.

Covenant-lite loans are those that have bond-like incurrence covenants, as opposed to more-restrictive maintenance covenants. Historically, as the leveraged loan market heats up and technicals shift in favor of issuers, cov-lite issuance grows. – Tim Cross

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April 18, 2013 at 5:17pm

Cash inflows to loan mutual funds hit lowest level in 12 weeks

Retail-cash inflows into bank loan mutual funds and ETFs totaled $789.6 million for the week ended April 17, according to Lipper FMI.

This is the lowest inflow in 12 weeks and the fourth smallest of 16 weeks this year. It is down from $994 million last week and $848 million in the week prior. With that, the four-week trailing average dips to $973 million, from $1.16 billion last week. At the same time this extends the win streak for loan funds to 44 weeks for a total inflow over that span of $23.4 billion, according to Lipper. The average weekly inflow during that run is $530 million.

ETF activity contributed $108 million to this week’s net inflow, or 14% of the total, versus $156 million for 16% last week. As such, the ex-ETF inflow was about $681 million.

Looking at results in the year to date, inflows are $15.9 billion, with $14.1 billion from mutual funds and $1.8 billion from ETFs. For comparison, net cash inflows over the same period a year ago totaled $1 billion, with the comparable breakdown $772 million and $262 million.

Total assets of the weekly reporter sample were $59.8 billion at the end of the latest observation period, which after stripping out the inflow shows an increase of about $45 million, or a gain of 0.08% due to market conditions. Total assets are up $17.8 billion in the year-to-date, for a 42% expansion. – Jon Hemingway

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April 18, 2013 at 12:56pm

Weekly CLO issuance rebounds to $2B; YTD volume: $29B

After a two-week lull, issuance of collateralized loan obligation vehicles has picked up over the last week, totaling $2.1 billion via five deals. Year-to-date CLO issuance now totals some $29 billion, including a hefty $26.2 billion recorded during the first quarter.

The largest CLO vehicle over the past week was a $514 million deal for Bluemountain Capital Group.

You can read more about CLOs in LeveragedLoan.com’s free online Loan Market Primer.

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April 17, 2013 at 11:42am

Loan-fund assets jump to record level in March, capping banner 1Q

In March, the assets under management of loan mutual funds climbed 6.9%, or $7.2 billion, to a record $110.6 billion, according to data from Lipper FMI and Yahoo! Finance. In absolute terms it was the sector’s second-biggest month of growth, behind only February 2011’s $7.4 billion. On a percentage basis, meanwhile, it trailed February 2013’s 7.2% ($7 billion) increase.

March’s tally puts an exclamation point on the first quarter’s torrid growth rate. Over the first three months of the year loan-fund assets grew by $19.7 billion, or 21.7%. That is the largest quarterly dollar increase ever, and the biggest percentage gain since the first quarter of 2011, when AUM jumped 31.1%.

The main reason for the growth? Loans remain one of the few options today for investors to see relatively wide yields (and there’s interest-rate protection, of course).

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April 16, 2013 at 11:47am

Leveraged loan bids rise in trading mart amid investor cash inflow

The steady stream of institutional investor cash flowing into the U.S. leveraged loan market over the past few quarters has led to increasingly lofty prices in the secondary.

The average loan bid, per the S&P/LSTA Index, climbed to a healthy five-eighths of a point in March, to 98.17 at quarter-end. That’s the highest it’s been in almost six years (since before the Lehman bankruptcy).

As for that investor cash: The CLO market has taken off in the past six months, with quarterly volume approaching levels seen pre-Lehman. This activity helped visible cash inflows into the loan market reach a hefty $41 billion during the first quarter ($26 billion in CLOs and $15 billion of retail cash).

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April 3, 2013 at 11:45am

Cash inflows to leveraged loan market soar in first quarter, thanks to CLOs

Institutional investors flocked to the leveraged loan market during 2013′s first quarter, with some $39 billion in cash flowing into investor coffers courtesy CLO issuance and loan mutual funds.

The massive injection of liquidity was paired with sky-high loan volume (the $185 billion logged during the quarter is a post-Lehman high). Despite the gaudy new-issue number, loan outandings grew by a slim $11 billion, as much of the activity entailed refinancing of existing debt.

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March 21, 2013 at 4:56pm

Loan mutual funds rake in another $1.36B of investor cash; 2nd-largest haul ever

Data from EPFR Global show a $1.36 billion cash inflow to U.S. bank loan mutual funds and ETFs in the week ended March 20, by weekly reporters only. This is the 30th consecutive week with inflows to the asset class, for $17.2 billion over that span.

This is the second largest weekly inflow ever following $1.42 billion in the Feb. 13 week. It is up from $1.15 billion last week and above the $1.2 billion four-week trailing average. Inflows totaling at least $1 billion have now been recorded in six of the past seven weeks.

ETF inflows at $147 million were up from $100 million last week and represent about 11% of the total inflow.

Total inflow for the year-to-date is $11.4 billion, with ETFs contributing $1.3 billion, or 12% of the total.

Total assets of the weekly reporter sample were $62.3 billion at the end of the latest observation period, which after stripping out the inflow shows an increase of about $1.2 billion, or a gain of 2.03% due to market conditions.

The total inflow for 2012 was $7.77 billion, with positive readings recorded in 42 of the 52 weeks with a weekly average for the year of $149 million. Roughly $1.2 billion, or about 16% of that figure, is tied to ETF inflows (there are now two funds in the sample: the BKLN PowerShares Senior Loan Portfolio and Pyxis iBoxx Senior Loan ETF). – Jon Hemingway

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March 21, 2013 at 11:35am

Weekly CLO issuance holds at healthy $2.5B; YTD volume: $22.6B

CLO issuance in the US for the week ended March 20 was a respectable $2.5 billion, in line with recent weeks. Year to date CLO issuance has hit $22.58 billion, not including a $304 million vehicle for Madison Capital that priced yesterday.

Of note during the week: a $523 million vehicle from CVC Credit Partners.

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March 15, 2013 at 1:39pm

Loan mutual fund assets under management grow 7%, top $100B

Loan mutual funds’ assets under management surpassed the century mark for the first time in February. All told, AUM grew 7.2%, to $103 billion, from $96.5 billion in January and $90.9 billion at year-end.

By both amount and percentage, February’s increase in AUM was the largest since February 2011, when loan funds expanded $7.4 billion, or 12.2%, to a then-record $68.3 billion. Not coincidentally, inflows to the sector soared to $5 billion in February, according to EPFR, Lipper, and Yahoo! Finance.

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March 14, 2013 at 5:24pm

Loan mutual funds see $1.15B investor cash inflow; 2nd-largest ever

Data from EPFR Global show a $1.15 billion cash inflow to U.S. bank loan mutual funds and ETFs in the week ended March 13, by weekly reporters only. This is the 29th consecutive week with inflows to the asset class, for $15.8 billion over that span.

This is the second largest weekly inflow ever following $1.28 billion two weeks ago. It is up from $1.01 billion last week and above the $1.09 billion four-week trailing average. Inflows total at least $1 billion have now been recorded in five of the past six weeks.

ETF inflows at $100 million were the lowest in six weeks and represent just 9% of the total inflow, the lowest portion since Jan 30. Last week ETF flows were positive $139 million, or 14% of the total.

Total inflow for the year-to-date is $10 billion, with ETFs contributing $1.1 billion, or 12% of the total.

Total assets of the weekly reporter sample were $60.9 billion at the end of the latest observation period, which after stripping out the inflow shows an increase of about $1.1 billion, or a gain of 1.9% due to market conditions.