10 Sep Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. August 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.
Right Back At It
Wasting no time after the US Labor Day lull, the loan market was essentially back to full speed last week as the new issue pipeline quickly filled and strong demand prevailed. The S&P/LSTA Leveraged Loan Index gained 0.24% and the average bid for loans rose 25 bps, to 94.75.
Twenty-five new deals launched in the primary last week. These transactions, coupled with announcements for upcoming offerings, totalled over $18 billion, the majority of which backed M&A and LBO deals.
Whilst the secondary market remained relatively quiet, retail loan funds enjoyed $112 million of inflows (Lipper FMI universe), and there was $361 million of CLO issuance, bringing the YTD total to $38.2 billion.
August in Review
The month of August was relatively strong and unseasonably busy, boosted by healthy technicals resulting from a light new issue calendar and pervasive investor demand. The primary remained issuer-friendly territory, while the secondary trended upward in tow. The Index gained 0.75% for the month after a more robust 1.43% July return. YTD, the asset class has returned 6.80%, a major uptick from 2015’s 2.10% return for the same period, and the best such YTD gain since 2012.
With loan returns generally trending lower after an unexpectedly strong July, lower rated and second-lien credits demonstrated the greatest upside move.
Risk premiums remain quite wide relative to historical standards, which means the asset class needs neither additional market value upside nor any actual increase in short-term interest rates to be considered attractive. The historical correlation between the pace of repayments and loan prices is in play once again with par plus prices partially responsible for the increased rate of repayments.