CAPX’s Post

The rise in interest rates has fostered a similar rise in dividend recaps which are experiencing a resurgence after a frenzied start to the year in the leveraged loan market. New loan issuance to fund a dividend reached $7.9 billion as of Jan. 24, the most for any month since November 2021. Dividend recap volume has been trending higher for several months, with supply in the second half of 2023 (at $13.6 billion) more than double the output of the first half. #pitchbook #privateequity #dividendrecap #investmentbanking 

#Leveraged loan issuance supporting dividend recapitalizations is running at a record pace. The persistent lack of net supply against surging investor demand has pushed borrowing spreads to multiyear lows across the credit quality spectrum. With those syndicated loan market stars aligned, #private equity sponsors are rushing to extract dividends from #portfolio companies, especially as the traditional #exit environment remains challenging. https://lnkd.in/gtiA8ifC

"The $1.3 trillion collateralized loan obligation market is about to become a victim of its own success because managers can’t create the bonds fast enough to meet demand and are running out of things to buy. A slowdown in mergers and acquisitions after borrowing costs rose is continuing to deprive the lenders of the leveraged loans that the industry was built on. About $311 billion of M&A deals have been announced and completed so far this year, roughly $1 trillion below the same level two years ago when interest rates began to rise, according to data compiled by Bloomberg. That may soon end up impacting the equity arbitrage — the gap between the yields that CLO managers can earn on the loans they buy and the bonds they sell — which may hurt new issuance in the coming months. It’s also sent more managers into the secondary market, where about 60% of loans now trade above par, making it that much harder to find bargains to put together a portfolio. (...) Demand for the safest CLO tranches soared this year after an influx of money into exchange-traded funds. Banks have also been piling into the AAA bonds, and some Japanese institutions may scoop upmore of the debt. On top of that, Bank of America estimates that about $64 billion of the debt has been paid back so far this year, including amortizations and called CLOs, meaning asset owners have more capital to put to work. (...) Demand is so strong that even an 86% increase so far this year in US sales of new issue CLO bonds from the same period in 2023 hasn’t been enough to sate investors’ appetite. As a result, spreads on the AAA debt have compressed by more than 100 basis points over the benchmark since late 2022, when the tranches were reaching eye-popping levels that made equity returns unattractive for investors. Lenders are also trying to circumvent the dearth of paper by increasing their holdings of corporate bonds — both investment-grade and junk — in an attempt to preserve arbitrage returns, Gupta said. The rise of private credit is also crimping opportunities for leveraged loan lenders by winning business from them, even as Barclays Plc forecasts M&A volume to grow by as much as 20% over the next 12 months."

It was another solid performance for US leveraged loans in February with the asset class returning 0.91%, bringing the YTD figure to 1.63%. Almost all of that is from coupon-clipping, as base borrowing rates remain elevated while secondary prices hold pat. Other key February stats: - The size of the market increased for the first time in five months - Triple-C loans seriously outperformed, returning 2.35%, including a hefty market-value increase - Syndicated loans bested other asset classes tracked by PitchBook LCD, except equities, which gained 5.34% - With CLO issuance surging, measurable investor demand in the asset class hit its highest level since the Fed starting hiking rates Check out the full February Wrap/Morningstar LSTA Leveraged Loan Index report, which includes complete returns analysis, issuance stats, a look at the leveraged loan maturity wall, outstandings, repayments, and much more. https://lnkd.in/d89WNQRY Marina Lukatsky PitchBook #credit #leveragedloans #privateequity

In 2023, US leveraged loan trading revenue saw a rebound, challenging the expectations set by rising interest rates. This development highlights the sector's ability to adapt and thrive amidst economic shifts. The article provides a comprehensive analysis of the factors contributing to this rebound, offering insights into the resilience of the leveraged loan market. For a detailed understanding of this trend, read the full article below... https://lnkd.in/eD5-dGRX ____________________________________________________________ 🙂 I’m Danny – feel free to connect, the greater the network the greater the results! ✅ I partner with CEOs and MDs of Trading firms to help them find the best talent in the Trading Industry for their teams. 🔥 By connecting them to high-quality Trading Industry candidates across the US and UK, we aim to save time & money by reducing your time-to-hire. ___________________________________________________________ #ceo #coo #trading #commodities #digitalassets #tradingtechnology #equities #liquidity #fx #options #cfdx #spreadbetting #metals #fixedincome #DAFinancialTradingRecruitment

Buyout-related leveraged loans and direct lending volumes have seen a spectacular uptick in 2024 thus far, recording a 75% and an 89.4% YoY increase, respectively. Leveraged loan volumes have soared due to three outsized deals, while direct lending saw a renewed interest in buyout transactions this year. In contrast, high yield bond volumes took a nosedive to USD 4.3bn in 1H24 from USD 9.2bn in 1H23, reflecting a 53.6% decrease in leveraged buyout-related volumes. For more insights check out Debtwire and Mergermarket's 1H24 US Buyout Highlights report here: https://lnkd.in/eShp3gZP

"Last year was a volatile year for global markets, but also one where economies performed better than expected." In today's blog, Elena Rinaldi, CFA, Portfolio Management, looks into the latest insights on the leveraged loan market and how these impact CLOs. Read the trends here: https://okt.to/QxiDcL #CLOs #leveragedloans

The US leveraged loan segment returned a whopping 13.32% in 2023 as investors, emboldened by the prospect of a soft landing/end of rate cuts, warmed to risk assets. The only better year for loan returns was 2009, when the markets were rebounding from the depths of the Global Financial Crisis. On the downside: The syndicated loan asset class shrunk in 2023, a victim of the M&A drought. It's the first time Morningstar LSTA Loan Index outstandings have declined since 2010. https://lnkd.in/eV96aeH2 #leveragedloan Marina Lukatsky PitchBook

“The real area of interest with respect to leveraged loans, however, is 2024 activity to date—the syndicated market is blazing hot in terms of new issuance to start the year.” In our Turnaround & Restructuring quarterly market update, Matt Tjaden, CFA & Patrick O'Malley, CPA break down the latest in leveraged loans, high-yield bonds, private credit, and distressed activity—and what it all means for business in 2024. https://lnkd.in/eyBF5iG5

Semi-annually federal banking regulators conduct a Shared National Credit (SNC) exam across U.S. banks. SNC evaluates shared corporate credit exposures across US banks for purposes of quantifying banks’ exposures over time and sampling credit files as relates to banks’ credit marks and risk management. After reading the FT article that Ebrahim flagged, I wonder — why not a SNC-style horizontal exam for US private credit providers of corporate loans to assess exposures and sample PC fund marks and risk management on shared credits? When private credit was focused on getting funding from institutional investors like endowments and sovereign wealth funds, it may have been appropriate for the official sector to ignore such a question. But as private credit increasingly seeks to raise funds from US retail investors, regulatory data collections and more rigorous oversight regarding valuations and risk management seem appropriate.