Fuelling the rise of leveraged loans

Quarterly issuance of leveraged loans in the US

After a hiatus in leveraged loan issuance during the credit crisis, the leveraged loan market is back again, to a large degree this has been driven by CLO issuance. Credit funds also represent another source of investment capital in the US with leveraged loans forming part of retail investors’ portfolios.

Ranbir Singh Lakhpuri, Portfolio Manager, Insight Investment

Pro rata loans consist of revolving credits and amortizing term loans. They are traditionally syndicated to finance companies and banks. Institutional debt consists of term loans structured specifically for institutional investors, including CLOs, although some banks buy institutional term loans.

After a hiatus in leveraged loan issuance during the credit crisis, the leveraged loan market is back again, to a large degree this has been driven by CLO issuance. Credit funds also represent another source of investment capital in the US with leveraged loans forming part of retail investors’ portfolios. Ranbir Singh Lakhpuri, Portfolio Manager, Insight Investment Pro rata loans consist … read more

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The rise of CoCo issuance continues…

CoCo bond issuance

We suspect there has been some indiscriminate buying of CoCos as investors have been attracted by the high coupons. We believe CoCos are mispriced and therefore fundamental credit analysis is key. Some fixed income investors may not appreciate the risks associated with CoCos as these bonds have blurred the lines between bonds and equities.

April LaRusse, Insight Investment

We suspect there has been some indiscriminate buying of CoCos as investors have been attracted by the high coupons. We believe CoCos are mispriced and therefore fundamental credit analysis is key. Some fixed income investors may not appreciate the risks associated with CoCos as these bonds have blurred the lines between bonds and equities. April LaRusse, Insight Investment    

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Europe’s issues growing

European HY corporate bond issuance

Many issuers coming to the market have increased levels of leverage while issuing bonds with weaker covenants. These are the types of issues we prefer to stay away from. Longer-term, the growing number of poorer-quality deals coming to the market may have an impact on sentiment.

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