- Similar to last week, loan market performance reflected a softer tone than what was witnessed earlier in the month. The S&P/LSTA Leveraged Loan Index (the “Index”) returned -0.10% for the weekly period ended April 30, while the average Index bid moved lower by 13 basis points. Despite this, April was a strong month for the asset class; the 4.50% gain was able to trim down some of March’s historic losses (-12.97%).
- With a few M&A transactions launching (most notably T-Mobile’s $4 billion term loan), the primary market was slightly more active this week, although a material pick up in issuance in not expected to commence anytime soon. In the forward calendar, repayments continue to outpace new supply by about $7.7 billion for the week.
- Retail loan fund flows were negative for the five business days ended April 29, totaling roughly $186 million for U.S. loan mutual funds/ETFs. In the CLO space, two new vehicles were issued this week, bringing the YTD tally to nearly $21 billion.
- Downgrade action continued, albeit at a slower pace compared to last week. In total, 39 facilities were moved lower on the ratings scale by S&P Global Ratings, with seven of them dropping into the CCC cohort. The Index did not experience any defaults during the week, as the trailing rate by principal amount ended April at 2.32%.
Source: S&P/LCD, S&P/LSTA Leveraged Loan Index and S&P Global Market Intelligence. Additional footnotes and disclosures on back page. Past performance is no guarantee of future results. Investors cannot invest directly in the Index.
Unless otherwise noted, the source for all data in this report is Standard & Poor’s/LCD. S&P/LCD does not make any representations or warranties as to the completeness, accuracy or sufficiency of the data in this report.
1 – Assumes 3 Year Maturity. Three year maturity assumption: (i) all loans pay off at par in 3 years, (ii) discount from par is amortized evenly over the 3 years as additional spread, and (iii) no other principal payments during the 3 years. Discounted spread is calculated based upon the current bid price, not on par. Please note that Index yield data is only available on a lagging basis, thus the data demonstrated is as of April 24, 2020.
2 – Excludes facilities that are currently in default.
3 – Comprises all loans, including those not tracked in the LPC mark-to-market service. Vast majority are institutional tranches. Issuer default rate is calculated as the number of defaults over the last twelve months divided by the number of issuers in the Index at the beginning of the twelve-month period. Principal default rate is calculated as the amount defaulted over the last twelve months divided by the amount outstanding at the beginning of the twelve-month period.
General Risks for Floating Rate Senior Loans: Floating rate senior loans involve certain risks. Below investment grade assets carry a higher than normal risk that borrowers may default in the timely payment of principal and interest on their loans, which would likely cause the value of the investment to decrease. Changes in short-term market interest rates will directly affect the yield on investments in floating rate senior loans. If such rates fall, the investment’s yield will also fall. If interest rate spreads on loans decline in general, the yield on such loans will fall and the value of such loans may decrease. When short-term market interest rates rise, because of the lag between changes in such short term rates and the resetting of the floating rates on senior loans, the impact of rising rates will be delayed to the extent of such lag. Because of the limited secondary market for floating rate senior loans, the ability to sell these loans in a timely fashion and/or at a favorable price may be limited. An increase or decrease in the demand for loans may adversely affect the loans.
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Past performance is no guarantee of future results.