03 Dec Voya Senior Loan Group – ‘Talking Points’ Weekly Update (incl. November 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. Contact Breakwater Advisory for more information.
‘From Turkeys to Tinsel….With a Little Fed In Between’ – Weekly Update
The S&P/LSTA Leveraged Loan Index returned 0.22% this week, as the market sprung back to life after the U.S. Thanksgiving holiday lull. The average Index bid rose 13 bps on the week, to close at 97.13.
The primary market closed out November and opened December with a mix of transactions, including several repricings, a few dividend recapitalisations and a respectable number of M&A-related deals.
The secondary market trended upward with the support of block portfolio activity, with OWICs totalling over $1 billion and BWICs totalling just under $900 million. Additionally, there was no shortage of interest in energy-related loans notwithstanding restructuring risk in this sector that remains, in general, quite elevated.
November in Review
Though more subdued in relative terms than September and October, and below the YTD monthly average Index return of 0.63%, November’s 0.26% return marked another positive month and brought the YTD return to a strong 8.90%. After a shaky start heading into the November 8 U.S. Presidential election, and a loss of 0.18% over the week ended November 4th, the loan market stabilised, posting gains for the rest of the month. As the market turned up its risk appetite, lower rated loans and second liens outperformed better quality for the month.
Voya Senior Loan Group believes the structural aspects of loans (position in the capital structure, ability to repay at par) in combination with a closing gap between LIBOR and the weighted average LIBOR floor (now under 10 bps) are all positive catalysts to support demand and help smooth some of the volatility other asset classes, such as High Yield, might experience in 2017 as economic, monetary and fiscal policies emerge under President-elect Trump’s administration.