The U.S. leveraged finance market rebounded smartly last week, posting $15.2 billion in combined leveraged loan and high yield bond issuance, according to S&P Global Market Intelligence LCD.
The bulk of the activity was courtesy Western Digital, which brought to market nearly $9 billion in loans backing the company’s acquisition of SanDisk. All in, the leveraged loan market saw $12.7 billion in much-needed volume after being all but shut out of the new issue market last week. Year to date, U.S. issuance totals $76.7 billion. That’s roughly unchanged from 2015, though the number is somewhat skewed by large deals, such as Western Digital and the $10 billion credit from Dell earlier in the year.
The U.S. high yield bond market saw $2.6 billion in new issues last week, bringing the YTD total to $23.5 billion. Despite a relative uptick in issuance and improvement in tone over the past weeks, that number is down more than 70% from the same period in 2015.
While the leveraged loan market has limped along in 2016, bright spots are emerging.
“The few transactions currently in market offered further evidence that new-issue sentiment has improved from a month ago,” says LCD’s Chris Donnelly, in his weekly market wrap-up. “Transactions were completed convincingly, with a few issuers even winning tighter terms. More importantly, there’s a sense that recent deals are of high quality and are unlikely to end up in a downward cycle of price discovery.”
Indeed, after months of withdrawals, investors are returning to U.S. loan funds, with a net $176 million flowing into the asset class last week, following a smaller inflow the previous week, according to Lipper. These deposits come after a brutal 32 consecutive weeks of outflows.
Likewise, the U.S. junk bond market is showing more life.
“The primary high-yield marketplace is steadily emerging from the stall-out of the late-February rebound rally,” says LCD’s Matt Fuller.
And investors have been returning in a big way, pouring $1.7 billion into U.S. high yield funds and ETFs last week, and $11.2 billion over the past month, says Lipper. – Tim Cross
This info first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.
