07 May Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. April in Review)
Voya Senior Loan ‘Talking Points’ is a weekly publication from the Voya Senior Loan Team Heads, which provides key insights and results in the Senior Loan marketplace.
In Search of Par
The movement toward par for a good portion of the loan market continued last week, while distressed credits also enjoyed improving market valuation. The Index was up 0.22% with average bids increasing by 14 bps to 93.01.
New issue activity improved a little, including the emergence of a few repricing transactions, as issuers sought better terms after a string of strong executions in prior weeks. Acquisition activity was the talk on the street as the pipeline received a boost from financing commitments.
Last week the upward movement of loans trading in the secondary at par or slightly higher stalled, at least for the moment. Traders attributed this to modest weakness in the high yield market, but noted as well that many loan investors are currently unwilling to bid above par given the probability of increasing refinance activity.
April in Review
April was a good month for the loan market. As loan prices rose and technicals remained favourable, the Index gained 1.99%, which brought YTD returns to 3.56%. Driving forces were the energy sector rally based primarily on higher oil prices and a CLO market that showed a much-welcomed rejuvenation.
As May begins, generally, demand for new loans continues to outpace supply. The anticipated increase in M&A and LBO activity will likely be several weeks off, leaving a continuing gap between available supply and demand. For the secondary market, while the bid ceiling for near and above par credits appears to be close at hand, there continues to be room for market price improvement.