Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

OUR POLICY TOWARDS THE USE OF COOKIES

All Refinitiv websites use cookies to improve your online experience. They were placed on your computer when you launched this website.
You can change your cookie settings through your browser.

Okay to Continue

More Information

LIPPER ALPHA
INSIGHT

NOVEMBER 9, 2018

Leveraged Loan Monthly – US: October

2018
by Hugo Pereira and Elizabeth Han.

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

The October 2018 ediiton of LPC’s Leveraged Loan Monthly is now available for download on
LoanConnector & LC Reports.

Contents:

Leveraged Loan Market Overview

US High-Yield Bond Market Overview
Investor Overview and Fund Flows
CLO Market Analysis
CLO League Tables

Primary Market

After a slower than average September, leveraged issuance increased to over $110 billion in October.
The jump was led by the closing of KKR’s LBO of Envision Healthcare’s and Tenneco Inc’s takeover of
Federal-Mogul. There was over $71 billion in institutional issuance, which made up 65% share of
monthly volume. YTD leveraged volume stands at over $1 trillion, down 10% YoY, with 63% of activity
institutional, in line with last year’s share.
Overall leveraged financing increased in October but a drop in high-yield bond issuance combined
with an increase in institutional loan volume meant that loans made up the overwhelming share of
activity. Institutional loans remain the in favor this year, recording $659 billion in volume, compared to

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

$161 billion in high-yield bonds.

The new money share of institutional loans remains elevated in October at 64%. After driving issuance
for most of the year, refinancing activity retreated in 3Q, as investors push back on aggressive terms
was met with an increase in new-money activity. YTD, 44% of institutional loan volume was new-
money purposed.
Flex activity remained firmly in favor of borrowers in October with downward flexes outnumbering
upward flexes by a factor of three to one. The average downward flex was 37bp, while the average
upward adjustment was 81bp.
Led by the Chapter 11 filing of long-struggling retailer Sears, there was $1.85 billion of defaulted par in
October, taking the year-to-date defaulted par volume to $18.5 billion, in line with activity recorded last
year. The trailing-twelve-month default rate continued to tick lower to 2.1 in October.

Secondary

Driven by slumping market values, returns on leveraged loans declined to negative 0.03% in October,
the first time loans fail to post a positive return since August of last year, according to the S&P/LSTA
LLI. Year-to-date loan returns now stand at 4%. Average returns for open-ended loan funds also
declined in October to 0.17% and now stand at 3.17% YTD.
The average multi-quoted institutional term-loan declined 19bp in October to the 98.2 context, as
broader market volatility took its toll across credit markets. Average prices were down 30bp across all
institutional term-loans.
The share of multi-quote institutional loans priced in the par-plus area declined to 45% at the end of
October (it ended September at 61%), while the share priced at or above 101 also ticked lower to 2%.
The pull-back in secondary prices saw the share of the secondary that is priced between 99 and 100
increase to 34%, from 20% the prior month. On a dollar-weighted basis, the par plus percentage
stands at 39%.
Institutional outstandings ended October at a new high-point of $1.119 trillion. Outstandings have
increased 17% so far this year.
The yield on US high-yield bonds widened to the highest level since 2016, ending October in the
6.89% range, up 65bp over the prior month, according to ICE BAML Index data. The average price
tumbled over 2 points in the month to 96.4 at the end of October.

CLO and Loan Funds

October CLO new-issue activity ticked up $1.07 billion to $9.55 billion over 19 deals. This is $2.88
billion lower than 2017 issuance over the same period but still behind 2014’s record levels. YTD 2018
CLO volume stands at $109.37 billion, which is 15% or $14.54 billion more than 2017 volume over the
same period.
CLO repricing activity almost doubled in October with $15.68 billion in total volume of resets and
reissues over 32 deals, as issuers moved forward on opportunistic refinancings and resets. 11 deals
were refinanced with AAA pricing at 108-117bp, 14 deals were reset with AAA pricing from 115-128bp,
and 6 deals were reissued with AAA pricing from 111-130bp.
The European CLO market ticked up slightly in October with 6 new issues pricing with a total volume of
€2.438bn. 2018 YTD volume stands at €22.88bn, compared with €13.33 billion over the same period
in 2017. As investor demand for CLO paper has grown, more US managers have been setting up shop

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

in Europe.
Assets under management rose to $579.45 billion for US CLOs and €93.13 billion for European CLOs.
Average DMs on CLO AAA liabilities widened across both US and European CLO to their highest
levels in 2018, to 118.75bp for US and 98.6bp for Europe. reflecting continued investor appetite in the
CLO asset class.
High-yield bond funds posted an outflow of $1.5 billion in September but recorded a small inflow for
the third quarter, compared to huge outflows in the first half of the year. YTD outflows for HY bonds
stand at $23.2 billion. By contrast, loans posted a small inflow of $768 million for September, taking
YTD inflows past $15.6 billion, as investors continue to show a high level of demand for floating-rate
loans.
Breaking loan funds out by their ETF and mutual fund categories, ETFs have registered inflows of
$1.1 billion, which has been shadowed by the $14.5 billion of inflows into loan mutual funds.

View this document on LC Reports

Find out more about Thomson Reuters LPC the premier global provider of syndicated loan and high yield
bond market information, keeping you on top of trading trends and investment decisions.

Share Tweet

Share +1

Email Print

ARTICLE TOPICS LEVERAGED LOANS ,

ARTICLE KEYWORDS AUM , CLO, FUND FLOWS, HIGH YIELD BOND , INSTITUTIONAL LOANS , INVESTOR ,
LEVERAGE LOAN , LOAN FUNDS , US LEVERAGE LOAN

Sponsored Content

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

Get In Touch

Sign Up for our weekly newsletter updates.

Subscribe

Thomson Reuters Solutions

Thomson Reuters Eikon

Thomson Reuters Thomson One

Lipper for Investment Management

Related Articles

DEC 10, 2018

Leveraged Loan Monthly – US: November 2018
The November 2018 edition of LPC's Leveraged Loan Monthly is now available for download ...

OCT 10, 2018

Leveraged Loans Monthly – US: September 2018
Leveraged Loan Monthly – September 2018 The September 2018 edition of LPC's ...

MAY 9, 2018
Thomson Reuters LPC Leveraged Loans Monthly – April 2018
Thomson Reuters LPC Leveraged Loan Monthly – April 2018 Contents: Leveraged ...

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

APR 5, 2018
Thomson Reuters LPC Leveraged Loans Monthly – March 2018
Thomson Reuters LPC Leveraged Loan Monthly – March 2018 Contents: Leveraged ...

Refinitiv provides solutions to the global financial community -

delivering critical news, information and analytics, enabling
transactions and connecting communities of trading, investing,
financial and corporate professionals.

Contributors

Terms & Conditions Privacy Policy Terms of Use Contact

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]

Leveraged Loan Monthly - US: October 2018 | Lipper Alpha Insight | Thomson Reuters

http://lipperalpha.financial.thomsonreuters.com/2018/11/leveraged-loan-monthly-us-october-2018/[12/31/2018 10:07:49 AM]