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Investors Pour Whopping $1.7B into US Leveraged Loan Funds

US loan funds

U.S. leveraged loan funds recorded an inflow of $1.76 billion in the week ended Dec. 7, according to the Lipper weekly reporters only. This is the largest single-week inflow since August 2013 and follows a $1.12 billion inflow from two weeks ago.

Despite a weak start to 2016, flows have been solidly positive in the second half of year, and particularly in recent weeks. The three largest inflows of the year have been recorded in the last four weeks. The weekly average over that span is $971.2 million, up from $519.7 million last week.

Inflows have now been recorded in 28 of 49 weeks this year.

ETF flows were a record high $559.9 million of the total this week, or 32%, while $1.2 billion flowed into mutual funds.

Year-to-date inflows to leveraged loan funds are $2.31 billion, based on outflows of $1.28 billion from mutual funds against inflows of $3.59 billion to ETFs, according to Lipper.

The change due to market conditions this past week was positive $343.8 million, the highest since the week ended July 13. Total assets were $75.5 billion at the end of the observation period. ETFs represent about 17% of the total, at $12.8 billion. — Jon Hemingway

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Another Gain for US Leveraged Loans; MTD Return = 0.49%

Loans gained 0.05% today after gaining 0.12% yesterday, according to the S&P/LSTA Leveraged Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.05% today.

Loan returns are 0.49% in the month to date and 9.44% in the YTD.

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Leveraged Loans Gain Another 0.09% Today, Extending Win Streak

Loans gained 0.12% today after gaining 0.09% yesterday, according to the S&P/LSTA Leveraged Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.16% today.

Loan returns are 0.44% in the month to date and 9.38% in the YTD.

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US Leveraged Loans Gain 0.09% Yesterday; YTD Return Grows to 9.25%

Loans gained 0.09% today after gaining 0.08% yesterday, according to the S&P/LSTA Leveraged Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.11% today.

Loan returns are 0.32% in the month to date and 9.25% in the YTD. – Staff reports

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For Sale: Assets in Patriarch Partner’s Defaulted Zohar CLO

A total of 133 line items of assets in the Zohar I CLO which was formerly managed by Patriarch Partners are set to be auctioned this Friday, Dec. 9 at noon EDT, according to a notice from the trustee, U.S. Bank.

You can download a pdf of the assets here.

Duff & Phelps Securities LLC will serve as the liquidation agent.

The auction is expected to shed some light on the value of assets on privately held issuers that in some instances were among the former collateral manager Patriarch’s many portfolio companies. The internal valuation methods employed by Patriarch on its three Zohar CLOs had previously garnered the attention from the Securities and Exchange Commission (SEC), which in March 2015 brought fraud charges against the manager and Patriarch’s CEO and founder, Lynn Tilton.

The Zohar I CLO had previously defaulted on Nov. 22, 2015, and Alvarez & Marsal Zohar Management took over as collateral manager on all three of the Zohar CLOs in February from Patriarch.

The securities to be auctioned include the term loans and equity interests in a number of companies that are privately owned, in some instances by Patriarch Partners themselves such as MD Helicopters, Inc.; Duro Textiles, LLC; and Xinhua Sports & Entertainment.

Interested investors can have the opportunity to meet with the management of the companies for sale subject to a confidentiality agreement by contacting the liquidation agent, Duff & Phelps.

U.S. Bank notes that there is still ongoing litigation across different courts creating uncertainty over the actual rights or transferability of the assets for sale. Those cases include Patriarch Partners Agency Services LLC v. Zohar CDO 2003-1 in the Southern District Court of New York. Patriarch Partners is claiming in its suit that under the governing documents, Patriarch’s removal as an administrative agent was invalid and therefore the sale of assets cannot be conducted.

Potential investors must also be wary that they may not have the full purview of the collateral in the Zohar I CLO. Alvarez & Marsal as collateral manager is also in litigation against Patriarch in the Delaware Court of Chancery in Zohar CDO 2003-1 v. Patriarch Partners LLC, claiming that Patriarch is still withholding critical documents providing more details about the holdings of the Zohar CLOs after it resigned as collateral manager on all of them.

Patriarch Partners also filed for an appeal on Nov. 28 to the Supreme Court of Delaware arguing that the trustee, U.S. Bank, has no right to transfer the equity interests of a number of private companies in the Zohar CLOs.

MBIA, who serves as a guarantor on the Zohar I CLO, is expected to use the proceeds from the sale towards paying its expected upcoming claims on the Zohar II CLO which matures on Jan. 20, 2017 (subscriber link) that it is also on the hook to insure. — Andrew Park

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US Leveraged Loans Return 0.08% Today; YTD Return Hits 9.15%

Loans gained 0.08% today after gaining 0.07% on Friday, according to the LCD Daily Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.09% today.

In the year to date, loans overall have gained 9.15%.

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Leveraged Loan Coffers Grow as Investors Eye Rate Hike, Trump Presidency

loan fund assets

Assets at U.S. loan funds rose by $2.84 billion in October, to $121.2 billion, as investors continued to pour money into the market.

The primary reasons for the ongoing investor bullishness regarding loans: A Fed rate hike later this month – which would bolster a floating-rate asset class such as loans – appears all but a done deal, and investors appear keen to bank on increased spending/inflation accompanying a Trump presidency.

This marks the fourth straight monthly gain for the asset class, for a total of $9.7 billion, according to Lipper. Since February, assets at U.S. loan funds have risen by nearly $14 billion.

The two main technical drivers of this asset growth will be familiar.

The first: loan funds saw a net inflow of $1.65 billion in October, according to weekly reporters to Lipper. That’s the fourth straight monthly gain, and is the largest since the $1.9 billion inflow in February 2014.

The second: Buoyed by the steady stream of cash flowing into loan funds and ETFs, prices in the secondary continued to rise in October, jumping by a hefty 205 bps during the month, according to the S&P/LSTA Leveraged Loan Index. (Note: some of that increase was due to credits exiting the Index).

As prices on loans increase, of course, their asset value rises. – Tim Cross

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US Leveraged Loan Funds See Whopping $1.12B Investor Cash Inflow

U.S. leveraged loan funds recorded an inflow of $1.12 billion in the week ended Nov. 23, according to the Lipper weekly reporters only. That nearly doubles the $673 million from the prior week and marks the largest inflow into the asset class since the week ended Sept. 18, 2013 ($1.33 billion).

US loan funds

Loan funds have been on a tear in the second half of the year. Inflows were recorded in 19 of the last 22 weeks for a total inflow of $5.78 billion during that span. Over the first 26 weeks of 2016 the cumulative outflow was $5.565 billion, with 18 negative weeks against just eight positive readings.

As such, the year-to-date figure swung positive with last week’s result, at $212.5 million, versus a total outflow of $906.2 million as of Nov. 16. That’s based on outflows of $2.7 billion from mutual funds against inflows of $2.9 billion to ETFs, according to Lipper.

ETF flows were 36% of the total last week, but logged their highest ever inflow by volume of $406.2 million. For mutual funds, the $712.4 million was the largest weekly inflow since January 2014.

With this large inflow, the four-week trailing average jumped to positive $471.5 million, from $264.5 million in the week prior.

The change due to market conditions this last week was positive $120.3 million, the largest increase in five weeks. Total assets were $70.56 billion at the end of the observation period. ETFs represent about 17% of the total, at $12.1 billion. — Jon Hemingway

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KKR Prices Hefty $711M CLO; YTD US Issuance: $60B

Citi today priced a $711.3 million CLO for KKR Financial Advisors II LLC, according to market sources. This is the manager’s third U.S. CLO of the year, which was upsized from $509.05 million originally.

An affiliate of the manager is expected to retain a majority of the subordinated notes, according to a presale report from Fitch Ratings analysts.

Pricing details are as follows:

Up to 60% of the loans in the portfolio can be covenant-lite, according to Fitch.

The transaction will close on Dec. 15 with the non-call period running until Jan. 20, 2019 and the reinvestment period until Jan. 20, 2021. The legal final maturity is on Jan. 20, 2029.

Year-to-date issuance is now $60.44 billion from 132 transactions, according to LCD data. November issuance is now $5.94 billion from 12 CLOs. — Andrew Park

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Leveraged Loans Gain 0.06% Today; YTD Return: 8.63%

Loans gained 0.06% today after gaining 0.03% on Friday, according to the LCD Daily Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.09% today.

In the year to date, loans overall have gained 8.63%.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.