Loans gained 0.01% today after gaining 0.03% 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, was unchanged today.
In the year to date, loans overall have gained 2.76%.
A full xls of the Daily Index is available to LCD subscribers, please click here.
Loan managers expect the leveraged loan default rate to tick up from May’s 1.4% reading over the next 12 months but to remain below the historical average of 3.3% in the near term, according to LCD’s latest quarterly buyside survey, which was conducted over the past two weeks. Managers cite three familiar reasons that defaults likely will remain in check: A lack of near-term maturities, short watch lists and a sense that economic growth will continue to plod along, bolstering corporate cash flow.
This analysis is part of a longer LCD News story, available to subscribers, that also details
Loans gained 0.03% today after gaining 0.03% 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 0.03% today.
In the year to date, loans overall have gained 2.75%.
A full xls of the Daily Index is available to LCD subscribers, please click here.
J.P. Morgan yesterday priced a $428.75 million CLO for BlueMountain Capital Management, according to sources.
The transaction, which is the asset manager’s second CLO to price so far this year, is structured as follows:
With BlueMountain’s deal, CLO issuance in the year to date grows to $39.55 billion across 80 deals, according to LCD. Nine deals have priced so far in June totaling $4.5 billion. – Kerry Kantin
In an investment landscape that has long been starved of yield – at least until the retreat of the past month – investors have embraced second-lien loans, which offer wider margins than either first-lien loans or even high-yield bonds. New-issue second-lien volume soared to $9.8 billion between April 1 and June 15 – the largest quarterly figure in six years – from $5.4 billion during the first quarter.
Issuance in the primary hit a post credit-crunch high in May, while secondary markets were down. CLO issuance was promising, with more in the pipeline, although new EBA directives threaten to hinder issuance going forward. More spread/yield compression is expected going forward, as issuers play loan and bond investors against each other in search of best terms.
The details:
Focusing on the secondary loan market, this chart details the average price of LCD’s European Loan flow name composite — a measure of the 12 largest, most liquid loans (consisting of 10 issuers) — since 2002.
Secondary loan prices fell 17 bps to finish the month at 100.41. Loan prices did go up as high as 100.61 only to fall 20 bps in the last week (on the back of softness in the global credit markets). This is the biggest swing in the last seven weeks, as a result, the average is at its lowest level since mid-April, although it remains 307 bps above the final reading of 2012.
This next chart details the average price LCD’S European High Yield Flow name composite – a measure of the 12 most liquid high yield issues – since the beginning of the year 2010.
The high yield market finished the month down 140 bps at 103.24, on the back of a sell-off in the broader credit markets. A sell-off in U.S. Treasuries started last week when the U.S. Federal Reserve flagged the potential for tighter monetary policy. A negative bias subsequently seeped into the credit markets – especially high-yield, where bonds across the board lost about a point. The average bid is now down 202 bps from the 2013 high of 105.26, from early May. Still, it is 28 bps higher in the year to date, having ended 2012 at 102.96.
This chart details the monthly return of the ELLI, a broad measure of European loan market returns that LCD calculates. All returns are ex-currency unless otherwise stated.
The European loan market had a positive return of 0.11% for the month of May, down from the 0.88% seen in April. This brings the year-to-date return to 3.19% versus 4.63% for the same period last year.
Now we turn from the secondary to the primary. This graph details new-issue volume for both leveraged loans and high-yield bonds.
Leveraged finance markets raised the bar in May, as issuance reached a post-crunch high of €17.6 billion, split fairly evenly between leveraged loans and bonds, at €8.7 billion to €9 billion respectively. Looking at loans first, the current volume is at its highest level in two and a half years. Sponsored volume accounted for the majority of May’s activity, at €7.6 billion, the highest reading since July 2008. Behind this impressive figure stand two mega-sized buyouts, each setting a post-crunch record in its own right. First, the €3.3 billion loan financing the buyout of D.E. Master Blenders by a Joh. A. Benckiser-led investment group is the largest buyout-related loan in six years (since National Grid Wireless in May 2007). It also makes the top-ten list of LBO loans on record, dating back to when LCD started tracking the European leveraged loan market in 2000.
High-yield went from strength to strength in May, hosting the largest monthly volume of paper in the history of the market, with €9 billion issued. This came about due to a surge in issuance rather than just a few big tickets, with only five borrowers issuing deals sized at €500 million or more. A total of 23 companies tapped the high-yield bond market in May, compared with 12 in March 2011, the month which held the prior volume record, with €8.4 billion.
The default rate by principal amount was down to 5.8% at the end of May from 5.9% at the end of April while the default rate by issuer count fell to 7.2% at the end May from at 7.1% at the end of April.
Themes to watch for going forward:
A video of this presentation is available at:
Slideshare download is available at:
http://www.slideshare.net/lcdcomps/eur-sld-shrjune2013v3