PDF | Research | Week of July 22 2024

As the leveraged loan market woke up this past January, as confidence in the economy and rate expectations grew, so the CLO market has rebounded. Not just in the US, as we detailed last week, but in Europe as well. 

Our friends at Creditflux highlighted this phenomenon, quoting one leading manager as saying: “Given the number of CLO issuances year to date, we see 2024 breaking records for gross new issue volumes in Europe.” 

As our Chart of the Week shows, European issuance year-to-date totals about €27 billion 2024, almost double 2023’s €15 billion of activity, per PitchBook LCD. Contrast that with US issuance of about $115 billion and $60 billion, respectively for this year and last year.

From a pricing perspective, both US and Europe have seen the cost of triple-A liabilities come down in the same way loan spreads have compressed. Recent European vehicles have been issued at their tights slightly below 130 bps with their US counterparts a bit above that...

New CLO issuance in Europe this year is outpacing 2023 by a wide margin.

Contact: Ryan Brown / PitchBook LCD

There were some signs of improvement in the second quarter, but raising new private debt capital was still a struggle in the first six months of 2024. 

The first half of 2024 did not offer much consolation to those awaiting clear signs of a private debt fundraising revival. Private Debt Investor’s provisional data for H1 records $108.5 billion of capital raised – down on the $114.1 billion total in the first half of last year, and a significant decline on the $143.3 billion total in the first half of the peak fundraising year of 2021 (see chart)...

Pricing tightened across all market segments in 2Q23 as demand for assets outpaced supply. This enabled borrowers to obtain more attractive pricing on new credits and refinance existing debt...

Contact: CJ Doherty / LSEG

GPs need to address the oncoming maturity wall of their existing investments, and many are turning to continuation funds to extend exit timelines or secure liquidity without forced selling...

Contact: Garrett Black / PitchBook

Contact: Eric Rosenthal / KBRA DLD

Middle Market & Private Credit

Fewer PMR ‘CCC’s Reach the ‘B’ Category

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Once in the ‘CCC’ category, fewer issuers in the PMR portfolio ascend to the ‘B’ category than public peers. The AAT% of ‘CCC’ category issuers that reach the ‘B’ category is just 11% in the PMR portfolio compared to 18% for Fitch’s public rating portfolio...

Contact: Brad Hamner / FitchRatings

Launched Volume

New-issue Yields

Weekly Fund Flows

Weekly fund flows source: Lipper

Contact: Robert Polenberg / LevFin Insights

Debtwire Middle-Market

The blue line in the chart is the current dividend yield of the *VanEck BDC Income ETF (currently at 10.9% as of 19 July, flat YoY and down 80bps from the highest level in last 12 months of 11.7% in October 2023) that tracks the overall performance of publicly traded business development companies (BDCs, are lenders to privately held middle-market businesses that tend to be below investment grade or not rated, with most lending comprising of senior secured loans)...

Contact: Suneet Chandvani/ Debtwire 

Private Debt Intelligence

Family office investors favor private debt 

Read more in Preqin’s Insights+ Research Note: Private wealth's path into US private debt

Family offices, which make up over a third of the private wealth entities, are showing a clear appetite for private debt strategies...

Contact: William Bennett-Lynch/ Preqin

Contact: Stefan Shaffer / SPP Capital Partners