content

Leveraged loan fund outflows ease to $374M; little ETF influence

US leveraged loan fund flows

Cash outflows from bank loan funds diminished significantly in the first 2015 full-week reading, at $374 million for the week ended Jan. 7, according to Lipper. That’s down from $1 billion last week, $1.3 billion two weeks ago, and a whopping $1.8 billion in the week ended Dec. 17, 2014.

Just like last week, the influence from exchange-traded funds was essentially nil, at just 1% of the redemption, or $2.3 million over the past week. Recall that ETFs were heavy, at 18% of the big withdrawal three weeks ago, and that was anomalous to most every other reading during the year.

The latest outflow represents the 26th consecutive weekly withdrawal and the 37th outflow in 39 weeks, for a net redemption of $24.6 billion over that span.

The trailing four-week average moderates to negative $1.1 billion for the week, from negative $1.3 billion last week and negative $1.2 billion two weeks ago. Last week’s observation was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.

The outflow kicking off the New Year is in contrast to last year, which showed a net inflow of $1 billion during the first week of the year. For the full-year 2014, outflows were roughly $17.3 billion, with ETFs representing about 3% of that total, or $516 million.

In today’s report, the change due to market conditions was negative $272 million, for a 0.3% decline against total assets, which were $88.3 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 8%. – Matt Fuller

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

content

US CLO Issuance Hits Record $124.1B in 2014

US CLO issuance

The U.S. CLO market printed $124.1 billion of new issues from 234 deals in 2014, according to LCD. That’s up from $83 billion in 2013 and blows through the previous high of $97 billion in 2006.

CLO issuance in December totaled $7.75 billion from 16 deals. It was the third lightest month of the year, ahead of just January ($2.55 billion) and September ($7.73 billion) At $13.78 billion, June topped the issuance charts last year, according to LCD.

Looking to this year, the general sense is that CLO issuance will continue albeit at a reduced rate. Regulatory uncertainty (risk retention, Volcker) and rising rates are likely to be key focal points for market players, who will also be watching for risk retention consolidation/strategic partnership plays. – Sarah Husband

Follow Sarah on Twitter for CLO market news and insight.

content

US Leveraged Loans Return Slim 1.60% in 2014; Lose 1.25% in Dec.

leveraged loan returns-annual

The S&P/LSTA Leveraged Loan Index return fell to a three-year low of 1.60% in 2014, from 5.29% in 2013. The Loan 100 lagged the broader Index in 2014 with a 0.99% return, after advancing 5.02% in 2013.

leveraged loan returns-monthly

For December, the S&P/LSTA Index returned negative 1.25%, as loans traded lower in the face of record retail outflows and crumbling investor sentiment early in the month.

It was the biggest monthly setback for the Index since August 2011, when returns plunged to a post-credit-crisis low of negative 4.40% amid a cocktail of exogenous events that was capped by S&P’s downgrade of the U.S.’s credit rating. – Steve Miller

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

content

Limping to Finish Line: Leveraged Loans lose 0.91% in 2014′s 4Q

US leveraged loan returns
The rocky climate in the U.S. leveraged loan market of late is reflected in the S&P/LSTA Index, which saw its worst quarter performance -wise since the third quarter of 2011, with a return of negative 0.91% between Oct. 1 and Dec. 18.

The analysis is part of a longer LCD News story, available to subscribers here, that also details

  • New-issue yields
  • Covenant-lite volume
  • Quarterly leveraged loan volume
  • Quarterly leveraged loan volume, by purpose
  • Repricing loan volume
  • Annual loan volume
  • Dividend loan volume
  • Refinancing loan volume
content

2014 Leveraged Loan Investor Market: CLOs dominate as retail bid, banks fade

loan investor market

Over the final three months of 2014, the investor base for leveraged loans shifted further away from loan mutual funds, which were wracked by significant outflows. The continued strength of the new-issue CLO market only partially filled the void, forcing arrangers and issuers to sweeten challenging deals to attract relative-value investors in search of wide-margin paper. – Steve Miller

Follow Steve on Twitter for leveraged loan analysis and insight.

 

content

Leveraged loan fund assets hit 15-month low as outflows persist

loan fund assets under management

The assets under management of loan mutual funds fell by $1.2 billion in November, to a 15-month low of $151.0 billion, according to Lipper FMI and fund filings. After reaching an all-time high of $175.1 billion in March, loan funds have suffered eight straight months of AUM erosion, during which they have contracted by $24.1 billion, or 13.8%. – Steve Miller

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

content

Oil & Gas Credits Comprise 4.5% Of Outstanding Leveraged Loans

leveraged loan oil and gas outstanding

The plunge in oil prices has pummeled both leveraged loans and, more famously, high yield bonds of late.

But while some 16% of high yield bonds support oil & gas related issuers (per the Bank of America Merrill Lynch High Yield Index), only 4.5% of outstanding leveraged loans back O&G concerns, according to the S&P/LSTA Leveraged Loan Index.

Year to date, oil & gas concerns have a bit more of a presence, accounting for 7% of new issuance in the U.S.

loan issuance by industry YTD

content

Default survey results show optimistic outlook for leveraged loans

LCD_Research_default_survey chart1 2014-12-12
Loan managers are constructive on the default outlook over the next two years, according to LCD’s latest quarterly buy-side survey taken in early December. On average, those polled said the default rate by amount will finish 2015 at 1.64% before increasing to 2.52% in 2016.

Putting this in context 
Technically, that would mean default rates would be lower in two years than they are now. After all, the rate at the end of November was 3.33%, and it’s on track to finish 2014 at 3.24%, assuming no defaults over the final few weeks of the year.

These figures, however, include Energy Future Holdings, which single-handedly increased the default rate by amount by 3.5 percentage points when it filed for bankruptcy in April. Sans EFH, which most participants view as an aftershock of the 2008/2009 credit crisis, the default rate was a mere 0.39% in November.

LCD subscribers can click here to read full story, analysis, and charts:

  • S&P/LSTA Leveraged Loan Index by issuer region
  • Average bid of first-lien loans
  • Shadow default rate (excluding EFH)
  • 2016 maturity wall
  • Average cash-flow coverage of outstanding loans
  • Average Leverage of large LBOs
  • Averaged cash-flow coverage for large-corporate LBOs
  • Maturity wall

 

– Steve Miller

Follow Steve on Twitter for an early look at LCD analysis, plus market commentary.

content

Oil & gas leveraged loans: Secondary prices sink, yields soar

oil gas borrowing costs

 

Though the impact of the recent plunge in oil prices on the broader S&P/LSTA Leveraged Loan Index is less severe than in the high-yield market, as discussed here, this week was nevertheless particularly brutal for loans in the sector.

As of yesterday’s close, the average bid price of first-lien oil & gas Index loans had tumbled to 90.35% of par, from 94.90 at the Nov. 28 close and down from 96.77 at the end of October, pushing the spread to maturity implied by the average bid to L+731, from L+600 at the end of November. – Kerry Kantin