Spurred by more-dovish-than-anticipated comments from Fed Chair Janet Yellen, the 10-year Treasury rate fell six basis points, to 1.94%, on March 31, from 2.00% a month earlier. As a result, loans underperformed 10-year Treasuries in March, while running even with high-grade bonds. With risk assets under pressure, however, loan returns ran ahead of equities and high-yield.
For the year-to-March, likewise, the 10-year rate is down 23 bps from 2014’s final read of 2.17% and, as a result, fixed-income products are running ahead of loans and equities. – Steve Miller
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The U.S. CLO market is wrapping up its busiest month ever, with more than $14 billion in issuance during March, according to S&P Capital IQ/LCD. March tops off a record first quarter, which has seen $28.62 billion of activity (so far). – Sarah Husband
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Citigroup today priced an $856.75 million CLO for Guggenheim Partners Investment Management, which was upsized for a second time, according to sources.
The transaction is structured as follows:
Recall the transaction was initially outlined as $654.55 million, though it had previously been increased to $805.4 million.
The deal has a two-year non-call period, a four-year reinvestment period and a 12-year legal final maturity.
The asset manager yesterday also priced its $558.9 million Kitty Hawk CLO 2015-1 deal via Mitsubishi UFJ Securities, though note this is Guggenheim’s third print in the U.S. this year.
CLO issuance in the year to date now stands at $28.11 billion from 52 deals, according to LCD. March issuance is $13.58 billion from 25 deals. Though there are still a couple more days left in the month, issuance thus far in March is the highest since June 2014, when $13.78 billion of deals priced. – Kerry Kantin
For more on how the CLO markets work check out LCD’s Loan Primer.
Bolstered by a troika of large, well-rated, corporate M&A loans – Dollar Tree ($6.2 billion), Valeant Pharmaceuticals, ($5.15 billion), and Ball Corp. ($3 billion revolver) – new-issue volume has risen in the first quarter, to $80.7 billion, including $53.9 billion of institutional tranches, from a three-year low of $66.6 billion/$43.4 billion over the prior three months.
Still, participants are not exactly breaking out the cigars and champagne. The primary market is off to a flat-footed start versus the liquidity-heavy/regulation-light first quarter of 2014, when arrangers placed $168 billion of new issues, including $129 billion of institutional facilities. In fact, 2015 is off to the slowest start for any year since 2010. – Steve Miller
This analysis is taken from a longer LCD News story, available to subscribers here, that details first-quarter leveraged loan activity in full.
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There’s a rebound in steeper-priced institutional leveraged loan debt in Europe, according to LCD’s Ruth McGavin, as picky investors are leaving some new-issue deals by the wayside.
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It was another busy week of marketing and pricing in the U.S. CLO market, while Europe saw a single new print, with more expected shortly.
- Year-to-date, global volume rose to $27.58 billion.
- U.S. CLO volume totals $24.84 billion for 46 deals, versus $19.92 billion for 39 deals in the same period last year.
- European CLO volume stands at €2.44 billion from six transactions, versus €2.06 billion for five deals in the same period last year. – Sarah Husband
This story was taken from a longer piece of analysis available to LCD News subscribers also detailing
- March CLOs
- CLO pipeline
- Volume: CLO vs Inst’l loans (US and Europe)
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For more on the CLO market check out LCD’s free Loan Market Primer/Almanac.
Bank loan outflows were grew to $228 million for the week ended March 18, versus outflows of $31 million in the prior week, according to Lipper. The latest outflow was split between mutual funds and ETFs, with mutual funds recording $160 million of the full amount, while ETF outflows continued for the second week in a row following a six-week period where ETFs reported inflows against mostly outflows at mutual funds.
There has now been a total of $27.6 billion of outflows recorded over the last 49 weeks, with only three weeks seeing inflows over that span. The year-to-date outflow now sits at $3.1 billion, with 4% tied to ETFs, versus an inflow of $6.5 billion at this point last year, with 16% tied to ETFs.
The trailing four-week average fell to negative $143 million, from negative $54 million last week and negative $52 million two weeks ago. Recall that the negative four-week observation 12 weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.
In today’s report, the change due to market conditions was negative $172.9 million, a change of 0.20% against total assets, which were $92.6 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 7%. – Joy Ferguson
U.S. leveraged loan issuance totaled $8.7 billion last week, in what was a relatively quiet market. The big deal, volume-wise: Valeant‘s $4.55 billion (in new money) credit backing it’s proposed acquisition of Salix.
With the recent activity, year-to-date loan volume in the U.S. totals $72.3 billion, down noticeably from the $130.5 billion seen at this point in 2013. – Staff Reports
Leveraged loan managers remain constructive on the near-term default outlook, according to LCD’s latest quarterly buyside survey, conducted in early March. On average, participants expect the loan default rate to end 2015 at 1.63%, before ticking up to 1.81% by March 2016. By comparison, the historical average rate by amount is 3.23%. – Steve Miller
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A longer version of this analysis is available to LCD News subscribers.
- Composition of distressed ratio (by industry)
- Imputed default rate
- Leveraged loan maturity wall
Last week was the busiest of the year for the U.S. CLO market, with seven new CLOs printing for $3.91 billion. Other busy weeks this year include the week ended Feb. 6, in which seven deals printed for $3.53 billion, and the week ended Jan. 30, in which six deals printed for $3.44 billion, according to LCD.
Europe also saw a new print, and from a first-time manager to boot. – Sarah Husband
After the busy week, year-to-date statistics are as follows:
- Global volume rises to $20.79 billion.
- U.S. CLO volume rises to $18.44 billion for 34 deals, versus $14.20 billion for 28 deals in the same period last year.
- European CLO volume rises to €2.08 billion for five transactions, versus €1.65 billion for four deals in the same period last year.
Follow Sarah on Twitter for CLO news and insight.
You can read more about the CLO market here, in LCD’s Leveraged Loan Primer/Almanac.