July 2013, US Leveraged Loan Market Analysis


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Loans traded lower in June, handing the S&P/LSTA Index its first loss since May 2012. The decline, in part, was part of the broader retreat across the capital markets. As well, HY mutual fund managers sold loans to harvest cash in response to record outflows. Still, demand for loans continues to run hot as retail and institutional investors look for ways to hedge again rate rises.

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July 2013, US Leveraged Loan Market Analysis

  1. 1. US Leveraged Finance Market Update July, 2013 Steve Miller - Managing Director Text
  2. 2. 89 92 94 97 99 4/11 6/11 8/11 10/11 12/11 2/12 4/12 6/12 8/12 10/12 12/12 2/13 4/13 6/13 S&P/LSTA Index – Average Price Source: LCD - Leveraged Commentary & Data
  3. 3. 0% 1% 2% 3% 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 Loan Returns Outperform In June As Rates Rise R e tu rn s J u n 2 0 13 Y T D 2 0 13 S &P /L S TA  Index -­‐ 0.59% 2.31% B AML  HY  Master  (H0A0) -­‐ 2.64% 1.50% 10-­‐ year  Treasury  (G A10) -­‐ 2.62% -­‐ 4.88% S &P  500,  inc luding  dividends  (S P X )-­‐ 1.34% 13.84% B AML  High-­‐ G rade  C orp  (C 0A0) -­‐ 2.76% -­‐ 3.31% S ource:  S &P  C apital  IQ  LC D ,  B ank  of  A merica  Merrill  Lynch 10-Year Treasury Rate Source: Federal Reserve
  4. 4. Visible Inflows Text Source: LCD - Leveraged Commentary & Data, EPFR -$1B $2B $6B $9B $12B 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13 CLO Issuance Loan Mutual Flows
  5. 5. S&P/LSTA Index Loans Outstanding Source: LCD - Leveraged Commentary & Data $500B $520B $540B $560B $580B $600B 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 2/13 3/13 4/13 5/13 6/13
  6. 6. Average New-Issue Clearing Yield of First Lien Loans Source: LCD - Leveraged Commentary & Data 3% 4% 5% 7% 8% 9% 2/11 4/11 6/11 8/11 10/11 12/11 2/12 4/12 6/12 8/12 10/12 12/12 2/13 4/13 6/13 All-BB All-B
  7. 7. Covenant-Lite Share of New-Issue Volume Source: LCD - Leveraged Commentary & Data 0% 10% 20% 30% 40% 50% 60% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 June 2013
  8. 8. 0% 2% 5% 7% 10% 12% 12/98 8/00 4/02 12/03 8/05 4/07 12/08 8/10 Loan Default Rate Source: LCD - Leveraged Commentary & Data 6/13
  9. 9. • Demand for loans remains strong, however Loan Market – Outlook • Summer focus on M&A calendar • Sharp slowdown in opportunistic volume Source: LCD - Leveraged Commentary & Data
  10. 10. www.linkedin.com/groups/LCD-Leveraged-Loan-Group-2092432 LCD Leveraged Loan Group ... 10,000+ contacts www.twitter.com/lcdnews Headlines, market chatter www.facebook.com/lcdcomps/ Daily Playbook, headlines, video analysis Follow LCD www.lcdcomps.com news, analysis, research, archives www.highyieldbond.com Free website covering the HY market www.leveragedloan.com Free website covering the leveraged loan market
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