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5/18/2020

Weekly Leveraged Loan Market Update

Signs of Life

  • Four loan deals launched last week totaling $2.5 billion of volume
    • To support its merger with TiVo, Xperi Holdings (BB- / Ba3) launched a six-year $1.1 billion covenant-lite term loan with price talk of L+4.00% at 96.00
    • Bombardier Recreational Products (BB- / B1) circled a $600 million covenant-lite first lien term loan with pricing of L + 5.00% at 97.00
      • Secondary loan market ended a three-week streak of declines as the average bid of LCD’s Flow Name Index increased 37 bps to 91.65
        • High yield market remains active - YTD volume of $130.7 billion is up 31% year-over-year


                        Bottom Line
                        The loan market strives to find its “new normal” while high yield continues to be bolstered with support from the Federal Reserve.


                        Weekly LoanDex®: A Middle Market Health Gauge

                        Weekly LoanDex Tracker


                        YTD LoanDex® Tracker

                        Weekly LoanDex Tracker

                        LoanDex® Model Drivers

                        Broader Market Sentiment
                        Broader market sentiment links the volatility of macroeconomic indicators, monetary and fiscal policy, and political events to the leveraged loan market. Macroeconomic momentum, in the context of prevailing business cycles, is a key indicator for investor confidence and required security yields. Quantifying systematic risk, especially tail-end risk, is the first step to forecast leverage loan yields and volume trends.

                        Loan Market Technicals
                        Loan market technicals are a snapshot of liquidity based on the current and trailing supply/demand dynamics.  CIT's model factors net loan flows, adjusted new-money volume and other independent variables to quantify surplus / deficit liquidity. Periods of excess liquidity are frequently characterized by eroding credit discipline and tightening clearing yields as investors compete for scarce assets, whereas lenders exercise more influence during periods reflective of constrained market demand. In addition to the current technical equation, CIT monitors the trailing supply/demand relationship to quantify sideline liquidity

                        Loan Market Secondary Support
                        Secondary market volatility influences investor confidence and relative value in the primary market. CIT's model quantifies the secondary market support by tracking secondary loan price movement with an emphasis on normalized deviation metrics. 

                         

                        Disclaimer: The information contained herein has been compiled from a variety of sources believed to be reliable.  We do not guarantee such information or make any representation as to its accuracy.  This publication is intended to provide general information regarding capital markets and financing matters and is not intended nor should it be construed, to provide legal, accounting or financial advice.

                        Source: S&P's Leveraged Commentary & Data, Thomson Reuters LPC, Bloomberg, Capital IQ, Moody's, S&P Credit Portal

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