U.S. leveraged loans have been ensnared in the broad market selloff in the fourth quarter that has likewise pressured the high-yield bond and equity markets.
Retail investors such has loan funds, shifting to risk-off mode, pulled cash from the asset class and left the leveraged loan new-issue machine, which operated largely unfettered in 2018, in a bind. As a result, loans aimed at institutional investors such as CLOs has totaled $76 billion for the quarter through Dec. 14, according to LCD, the lowest amount since the first quarter of 2016, before interest rates began to rise, kick-starting a long period of dramatic growth for the asset class.
The fourth-quarter number is down 15% from the prior quarter and 46% from 2Q18.
The recent activity leaves 2018 U.S. leveraged loan issuance at $609 billion, taking into account institutional loan issuance and credits syndicated to traditional banks and financial institutions (these deals include amortizing term loans and revolving credits). That’s down from the record $650 billion in 2017, according to LCD.
The institutional loan segment posted $436 billion this year, compared to a record $503 billion last year, according to LCD.
Note: While these numbers are as of Dec. 14, they are not expected to change dramatically between that date and the end of the year proper.
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