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.
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You can read more about the CLO market here, in LCD’s Leveraged Loan Primer/Almanac.
U.S. leveraged loan fund outflows increased to $196 million for the week ended March 4, compared to $118 million in the prior week, according to Lipper. The latest outflow was once again entirely tied to mutual funds, with ETFs recording a $5 million inflow for the week. Last week, ETFs reported a $24 million inflow.
There has now been a total of $27.3 billion of outflows recorded over the last 47 weeks, with only three weeks seeing inflows over that span. The year-to-date outflow now sits at $2.9 billion, with 0% tied to ETFs, versus an inflow of $5.6 billion at this point last year, with 13% tied to ETFs.
The trailing four-week average declined to negative $52 million for the week, from negative $131 million last week and negative $212 million two weeks ago. Recall that the negative observation 10 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 positive $379.7 million, or roughly 0.43% against total assets, which were $87.8 billion at the end of the observation period. The ETF segment comprises $6.9 billion of the total, or approximately 8%. – Joy Ferguson
Triumph Capital Advisors has acquired the management contracts of two active CLOs from Doral. The CLOs consist of roughly $703 million in assets under management, and bring Triumph Capital Advisors’ outstanding assets under management to roughly $1.7 billion.
The development is part of the agreement of Triumph Bancorp, Inc. via its wholly owned subsidiary Triumph Capital Advisors, LLC, to acquire all the equity of Doral Money, Inc. and certain related assets in connection with the Federal Deposit Insurance Corporation’s auction process for Doral Bank. Doral Bank was placed under FDIC receivership on Friday.
In addition to the CLO management contracts, Triumph has also assumed the primary assets of Doral Money – namely loans with a face value of approximately $37 million; and certain securities of the CLOs, which were divested to a third party immediately following the closing as part of an agreement entered into by Triumph Capital Advisors in connection with the transaction.
San Juan-based Doral hired a loan investment team in 2009, with Doral Leveraged Asset Management going on to price three CLO transactions between 2010 and 2012. The first, Doral CLO I has been called.
Dallas, TX.-based Triumph Capital Advisors launched in March 2013 as the credit-focused investment-management unit of bank holding company Triumph Bancorp, and it has issued two CLOs, both last year via Nomura.
Dechert LLP acted as legal advisor to Triumph Capital Advisors with respect to the assignment of the Doral CLO management contracts. – Sarah Husband
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In February, no new defaults cropped up in the S&P/LSTA Index. As a result, the lagging-12-month default rate edged down to 3.92% by amount, from 3.99% in January. By number of loans, the rate likewise fell to 0.73%, from 0.75%. – Steve Miller
This chart is part of a longer analytical story, available to LCD News subscribers, that also details
- Leveraged loan default rate by number of deals
- Defaulted issuers in last 12 months
- Shadow default rate
- Default ‘candidates’
- 2016 leveraged loan maturity wall
- cash flow coverage of outstanding loans
- LBO leverage
- Leveraged loan secondary bids
Given the combination of rising demand for risk assets and rising rates in February, leveraged loan returns trailed those of equities – which jumped to a three-year high – and high-yield bonds, while beating investment-grade corporate bonds and 10-year Treasuries.
Since year-end, however, rates have been relatively stable. As a result, leveraged loan returns are running behind each of the other four asset classes LCD tracks here monthly. – Steve Miller
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Regulatory pressure is curtailing how aggressively new leveraged buyouts are being structured, a fact made clear by recent credit statistics.
Since the Shared National Credit Review of last summer, the average debt multiple of new large LBOs – the most consistent sample LCD tracks when it comes to credit stats – has eased to an average of 5.6x over the past five months, from 5.8x during first three quarters of last year and a recent apex of 6.3x during the third quarter of 2014. – Steve Miller
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Cash outflows from bank loan funds were just $25 million for the week ending Feb. 11, marking the lowest outflow reading since the week ending April 23, 2014, and not including two weeks of inflows within that time frame, according to Lipper.
This week’s outflow compares to outflows of $511 million and $443 million in the previous two weeks. For a third consecutive week, the redemption was offset by inflow to the exchange-traded-fund segment, at $31.4 million this week compared to just $579,000 last week.
The latest outflow represents the 31st consecutive weekly withdrawal and the 42nd outflow in 44 weeks, for a net redemption of $27 billion over that span.
The trailing four-week average declines to negative $429 million for the week, from negative $572 million last week and negative $537 million two weeks ago. The negative observation seven weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.
The net $2.7 billion outflow for the first six weeks of the year, with 2% ETF-related, is in contrast to last year, which showed a net inflow of $4.2 billion for the same period, with 12% ETF-related. 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 positive $306 million, or roughly 0.35% against total assets, which were $86.8 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 8%. – Joy Ferguson
Cash outflows from bank loan funds were fairly steady, at $511 million, for the week ending Feb. 4, versus $443 million last week and $738 million prior, according to Lipper. For a second consecutive week, however, the redemption was tempered by a small inflow to the exchange-traded-fund segment, at just under $1 million.
The latest outflow represents the 30th consecutive weekly withdrawal and the 41st outflow in 43 weeks, for a net redemption of $26.9 billion over that span.
The trailing four-week average expands modestly, to negative $572 million, for the week, from negative $537 million last week and negative $684 billion two weeks ago. The observation seven weeks ago, at $1.8 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.
The net $2.7 billion outflow for the first five weeks of the year, with 3% ETF-related, is in contrast to last year, which showed a net inflow of $3.6 billion for the same period, with 9% ETF-related. 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 positive $392 million, or roughly 0.5% against total assets, which were $86.6 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 8%.
Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.