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Leveraged loan funds – outflow streak continues into 11th consecutive week

Cash outflows from bank loan funds totaled $382 million during the week ended Sept. 24, narrower than $583 million in outflows last week, but a slight uptick from the $341 million outflow recorded two weeks ago, according to Lipper.

The influence of bank-loan ETFs on this week’s number was 12%, or $48 million. This compares to an outflow of $16 million from ETFs last week.

There now have been 22 weeks of outflows over the past 24 weeks, for a total outflow of $11.9 billion over that span, which follows a record-shattering 95-week inflow streak that totaled $66.7 billion.

The trailing four-week average gaps out slightly to a negative $435 million per week, from negative $414 million last week. This measure remains below the recent peak of negative $858 million from the week ended June 11.

The year-to-date fund-flow reading pushes deeper into negative territory, at $4.8 billion, based on a net withdrawal of $5.2 billion from mutual funds against a net inflow of $395 million to ETFs. In the comparable year-ago period, inflows totaled $44 billion, with 11% tied to ETFs.

The change due to market conditions was negative $217 million, versus total assets of $102.4 billion at the end of the observation period. The ETF segment comprises $8 billion of the total, or approximately 8%. – Joy Ferguson

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Leveraged loan prices slip to lowest level since July 2013

With a negative bias creeping back into the market, the average bid of LCD’s flow-name composite slid 16 bps in yesterday’s reading, to 98.36% of par, from 98.52 on Sept. 18.

Among the 15 names in the sample, eight declined, one advanced, and six were unchanged from the previous reading. Fortescue andIntelsat were the largest decliners, with each falling half a point, to be bid at 98.5 and 98.75, respectively, in today’s reading.

With the allocation of the $6.75 billion TLB for Burger King expected within the coming days, not to mention another $760 million of BWIC supply hitting the market today, the secondary loan market has cooled. With today’s drop, the average bid is at its lowest level since July 2, 2013.

Accounts remain focused on the new-issue market, and Burger King’s deal in particular, as the fast-food chain’s deal would be the largest loan to allocate since Hilton Worldwide’s $7.6 billion term loan in September 2013.

With the average bid dropping 16 bps, the average spread to maturity rose three basis points, to L+437.

By ratings, here’s how bids and the discounted spreads stand:

  • 98.89/L+397 to a four-year call for the 10 flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+388.
  • 97.3/L+554 for the five loans rated B or lower by one of the agencies; STM in this category is L+536.

Loans vs. bonds
The average bid of LCD’s flow-name high-yield bonds fell 46 bps, to 103.02% of par, yielding 6.18%, from 103.48 on Thursday. The gap between the bond yield and discounted loan yield to maturity stands at 185 bps. – Staff reports

To-date numbers

  • September: The average flow-name loan is down 73 bps from the final August reading of 99.09.
  • Year to date: The average flow-name loan is down 157 bps from the final 2013 reading of 99.93.

Loan data

  • Bids fall: The average bid of the 15 flow names slipped 16 bps, to 98.36% of par.
  • Bid/ask spread widens: The average bid/ask spread rose five basis points, to 39 bps.
  • Spreads rise: The average spread to maturity – based on axe levels and stated amortization schedules – rose three basis points, to L+437.
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Leveraged Loan Primer now includes Index, Market Glossary

 

leveraged loan primer

 

LCD’s Loan Market Primer has been updated to include a detailed Index of items not already included in the main interactive menu, as well as a Glossary of loan market terminology.

As always, the Primer is free to all, as is LeveragedLoan.com, an LCD-powered site developed to promote the leveraged loan asset class.

The online Primer is a digital version of the print Primer LCD has long distributed to arranging banks, leveraged loan investors and other institutions, law firms and business schools with an interest in the leveraged finance market space (you can download the print version here).

Both versions of the Primer are updated with new content as the loan market evolves, and the online version includes a Market Almanac detailing key loan stats and trends, both current and historical.

For more free leveraged finance news and analysis check out HighYieldBond.com (there’s a Primer there, too).

Again, the Primers, LeveragedLoan.com and HighYieldbond.com are meant to promote the leveraged finance asset class, so please share them with anyone who might find them useful.

 

 

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US leveraged loan funds register outflow for 10th straight week

Cash outflows from bank loan funds grew to $583 million during the week ended Sept. 17, wider than respective outflows of $342 million and $435 million in the previous two weeks, according to Lipper.

The influence of bank-loan ETFs on this week’s number was just 3%, or $16 million. This compares to an outflow of $70 million from ETFs last week.

There now have been 21 weeks of outflows over the past 23 weeks, for a total outflow of $11.4 billion over that span, which follows a record-shattering 95-week inflow streak that totaled $66.7 billion.

The trailing four-week average gaps out slightly to a negative $414 million per week, from negative $404 million last week. This measure remains below the recent peak of negative $858 million from the week ended June 11.

The year-to-date fund-flow reading pushes deeper into negative territory, at $4.4 billion, based on a net withdrawal of $4.9 billion from mutual funds against a net inflow of $442 million to ETFs. In the comparable year-ago period, inflows totaled $43 billion, with 11% tied to ETFs.

The change due to market conditions was a negative $117 million, versus total assets of $103.0 billion at the end of the observation period. The ETF segment comprises $8 billion of the total, or approximately 8%. – Joy Ferguson

 

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Despite CLO boom, structured finance share of leverage loan mart eases

outstandings CLO vs loanIn a year when CLO issuance is booming and retail flows are negative, it’s surprising to note that the share of outstanding institutional loans held by structured-finance vehicles actually has declined, easing to 43.4% (as of Sept. 11), from 44.8% at the end of 2013. By dollar amount, that’s $343.1 billion (according to Wells Fargo CDO analyst David Preston) of the $790.1 billion in the S&P/LSTA Index.

This analysis is part of a longer LCD News story that also details CLO issuance, as a share of LSTA Index leveraged outstandings, structured finance outstandings – CLO 1.0 vs. 2.0 – and near-term possibilities regarding CLOs that will be called.

For more on how the CLO market works check out LCD’s online Loan Market Primer. It’s free, of course.

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Leveraged loan default rate to remain low in months ahead: LCD survey

Managers expect loan defaults to remain scarce in the near future, according to LCD’s latest quarterly buyside survey, taken in early September.

On average, managers predicted that the lagging-12-month default rate of the S&P/LSTA Leveraged Loan Index will end 2014 at 0.78% by amount, versus 0.44% in August. (These figures exclude Energy Future Holdings. Including EFH, they are 3.88% and 3.34%, respectively.) Looking out to September 2015, managers expect the rate to climb to 1.38% (EFH will have fallen from the lagging 12-month rolls by then).

For LCD subscribers, please click here to access the complete story, analysis, and the following charts:

  • Earnings growth of S&P companies
  • Averaged cash-flow coverage of outstanding loans
  • Averaged leverage of large LBOs
  • Average (EBITDA-capex)/cash interest of large LBOs

– Steve Miller

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

 

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CLO roundup: September gets off to slow start in both US, Europe

It’s been a tentative post-summer return for the CLO market with just three new issue CLOs pricing so far in the U.S. this month, and the Dryden XXVII tap providing Europe’s only new issue activity to date. Still, a number of transactions are expected to price this week, ahead of the IMN’s ABS East Conference in Miami next week (Sept. 21-23).

Global CLO issuance in 2014 stands at $97.71 billion, according to LCD.

LCD subscribers can click here for full story, analysis, and the following charts:

  • Deal pipeline
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume


– Sarah Husband

 

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Leveraged loan funds see outflow for 9th straight week, modest ETF influence

Cash outflows from bank loan funds declined slightly to $342 million during the week ended Sept. 10, versus outflows of $435 million last week and $297 million two weeks ago, according to Lipper. The influence of bank-loan ETFs on this week’s number was 21%, as Lipper recorded a $70 million outflow from ETFs. This compares to a $20 million inflow into ETFs last week.

There now have been 20 weeks of outflows over the past 22 weeks, for a total outflow of $10.9 billion over that span, which follows a record-shattering 95-week inflow streak that totaled $66.7 billion.

The trailing four-week average narrows to negative $404 million per week, from negative $490 million last week. This measure remains below the recent peak of negative $858 million from the week ended June 11.

The year-to-date fund-flow reading pushes deeper into negative territory, at $3.9 billion, based on a net withdrawal of $4.3 billion from mutual funds against a net inflow of $459 million to ETFs. In the comparable year-ago period, inflows totaled $42 billion, with 11% tied to ETFs.

The change due to market conditions was a negative $308 million, versus total assets of $103.7 billion at the end of the observation period. The ETF segment comprises $8 billion of the total, or approximately 8%. – Joy Ferguson

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Retail reticence: Leveraged loan fund assets see biggest drop since 2011

loan mutual funds AUM

 

The drag on demand from the retail sector in August continues to take its toll. During the month, investors withdrew $3 billion from loan mutual funds that report weekly to Lipper, versus $1.7 billion in July. That figure suggests that when all funds publish their numbers, AUM for the category will fall by $4.3 billion in August – the largest decline since 2011 – after a drop of $2.2 billion in July. – Steve Miller

The chart is part of a loan market technicals analysis, available to LCD News subscribers, that also details

  • change in loan outstandings
  • loan index outstandings
  • high yield bond fund flows
  • leveraged loan yields
  • repricing volume
  • covenant-lite loan issuance
  • CLO issuance

Follow Steve on Twitter.