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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

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Leveraged loans rebound, gaining 0.46% today

Loans gained 0.46% today after finishing unchanged yesterday, 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 0.83% today.

In the year to date, loans overall have gained 0.94%.

A full xls of the Daily Index is attached.

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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

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Capital One Bank hires Gates to head leveraged loan syndications

Capital One Bank appointed William Gates as head of loan syndications.

Gates will report to Steven Tulip, head of capital markets at the McLean, Virginia-based bank. Gates and Tulip are based in New York.

Gates had been a managing director at RBS, where he was responsible for the underwriting and distribution of all loan transactions in the Americas.

Gates was also a managing director in leverage capital markets with UBS. He also worked at Merrill Lynch in Leverage Loan Capital Markets, and was a founding member of Lehman’s loan syndicate group. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more

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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

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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.