Key Points:
Primary Market:
- Year to date leveraged loan issuance is at $751 billion, up 2% from the same period a year ago. Breaking it out by segment, pro rata volume at $387 billion is down 16%, while the $364 billion of institutional deal flow is up 34% .
- Technology, retail and healthcare are the top industries in terms of leveraged loan issuance this year.
- Overall institutional loan issuance is at $372 billion so far in 2016, a gain of around 34%. Refinancing activity has jumped by 51% this year, outpacing growth in new money issuance which is up 21% year over year.
- High yield bond issuance amounted to $14.5 billion in November. Year-to-date issuance is at $204 billion, which is down 18% from the same period last year.
- So far in 4Q16, yields have tightened to their lowest level this year. In the large corporate market, new issue yields have tightened to an average of 4.99%, while middle market yields have declined to 6.24%.
- There was one institutional loan default in November, Bennu Oil & Gas LLC with $487 million of institutional loan debt. The trailing twelve month loan default rate fell to 1.9%.
Secondary Market:
- Loan returns slipped in November, with 0pen-end loan fund returns averaging 0.21%, while the S&P/LSTA index gained 0.26%. Year to date, open-end loan funds have gained 7.7%, while the index is up 8.9%.
- After a period of climbing prices in recent months, the secondary market edged lower in November. Institutional term loans finished the month off 14 bps at 96.61. The flow name SMi100 was down 39 bps to 98.68.
- As of month-end November, 43% of loans are priced at 100-plus, down from 45% a month earlier. On a dollar weighted basis the par-plus share is higher at 52%. At the lower end of the price scale, 9% of credits are bid below 90 cents on the dollar, up marginally from 8% in the prior month.
- Looking across industries, the sectors bid highest are transportation (100.09), construction (100.02) and hotel & gaming (99.93). The largest sectors of technology and healthcare are bid at 97.93 and 97.97, respectively.
- European flow names remain highly priced, edging 4 bps higher in November to an average bid of 100.57.
- The share of par-plus loans in U.S. CLOs slipped to 48% (from 51%) in November. In European deals, the share of par-plus loans continued to climb, reaching 73%.
CLOs / Loan Funds:
- S. CLO issuance climbed to $10.6 billion in November, the highest monthly figure since June 2015. This brought YTD issuance to $65.1 billion, down from $91.4 billion in the same period last year.
- S. refinancing and reset volume has surged in the last two months., with November hitting a record. In these two months, refinancings (including resets) have amounted to over $20 billion, bringing year to date volume to over $28 billion.
- CLO AAA discount margins averaged 147 bps in November, marginally tighter than the prior month. Discount margins on AAA tranches ranged from 140 bps to a high of 163 bps.
- The European CLO market added €2 billion of issuance from five deals in November. Issuance now stand at €15.6 billion (38 deals) so far this year, up from €12.4 billion (31 deals) over the same period last year.
- Assets under management increased to $441 billion for U.S. CLOs and to €68 billion for European CLOs.
- Loan funds saw their fifth straight month of inflows, adding $2 billion in November (based on the most recent data available). This pushed flows into positive territory ($304 million) on a year to date basis.
- Loan mutual fund & ETF assets under management (market value) increased by 3% in November to $126 billion. In the last year, loan fund AUM is up 2%.
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