Capital Markets Update – Week of April 24 2020 (audio)

In an effort to provide even greater transparency around our offerings and our investment platform, Prath Reddy and the capital markets team provide weekly updates.

Listen below for Prath’s most recent views on our short-term note program and the current private credit landscape from Cadence’s perspective.

Please find the transcript for this video below.

Hey everyone. This is Prath Reddy, Head of Capital Markets here at Cadence. Thank you for tuning in to this week’s market update for the week ending April 24th, 2020 where we are providing insights that are relevant to participants in our STNP, aka short-term note program market.

Diving into the broader markets this past week, we’re still in the throes of earning season, but there was a lot of attention given to plunging oil futures earlier this week. We also saw another very weak jobs print with over 4 million people filing for unemployment and then Gilead came out and said that the drug that showed early signs of success, addressing COVID-19, turned out to be inconclusive. So naturally we saw equities whipsaw all week, ultimately giving back some of the gains over prior weeks.

In the credit markets, spreads have essentially stabilized in both the IG and high yield markets. IG spreads are holding around 230 basis points over treasuries, which is about 170 basis points tighter from the peak of around 400 hit a month ago, but still about a hundred wider from where we were before the COVID-19 crisis started. And on the high-yield side, similar story but amplified with spreads going from 500 to 1100 and now hovering in the mid 700s type context.

Honing in on our neck of the woods in the STNP Market, it was a stable week from a liquidity issuance and performance perspective. In terms of flows, we saw about $250,000 flow off the platform this week, but net-net we’re still up on the month. On the issuance side we closed two deals for a total of $2.3 million this week that had mixed results. The first was with TradeRiver, where we had originally gone out to auction the refinancing of the nine and five-eighths percent 8-A notes with a range out to 17.5%. Reason for the wide range, and this was given some of the sensitivities the underlying obligor Solar4America is facing in the current COVID-19 climate and the subsequent extension provided by TradeRiver on the collateralized payment obligation supporting the note. We ultimately launched the note at the very wide end at the 17.5% seeking $1 million, but in the end, we ended up coming up short to print $700k given the tepid demand. We are having weekly calls with Solar4America and TradeRiver to understand what Solar4America’s liquidity position is and when they’re going to be getting the government funding that they’ve applied for. When the California economy reopens, we believe, and TradeRiver believes, and the company believes that they’ll be in good financial standing to be able to repay our notes, as well as the upcoming obligations they have. 

The second was with Pollen, which was much better received. This was a call refinance of the 8.5% 3-K notes that launched at the wide end of auction levels, which was 12% commensurate with Pollen’s prior 3-P offering that closed earlier this month. We were originally seeking a modest upsize of the prior note to a total of $1.6 million and we ultimately became fully subscribed with just a few short days. The stark difference in performance, I think, between both of these offerings, we believe highlights the changing investor preferences as the market becomes more selective with which deals to invest in and what is appropriate given their own risk tolerances and risk-adjusted return objectives, which is, of course, great to see as we take painstaking efforts here at Cadence to make these programs as comparable to one another as possible and provide as much information as possible so that investors like you can make informed decisions. 

On this end, we have begun making available performance reports for SellersFunding this week, in addition to Wall Street Funding that could both be found on our website right under the Our Originators section and clicking through to their respective profile pages. We also did just announce a new originator, Cherry, that we’ll be providing a daily performance report for, as well. And we’re working for similar ones for Aspiria next week with many more to come. 

Lastly for all those that tuned into our first-ever quarterly investor update this past Wednesday – thanks so much for carving out the time. Nelson and I enjoyed getting everyone up to speed as to what we’ve been doing here this past quarter and walking through many of your questions. We’ll be providing responses to anyone’s questions that we didn’t get to. If you didn’t get a chance to check it out, don’t worry, we recorded the entire web cast and made it available directly on our website under the Insights section. That’s it from us this week, but thanks again for tuning in and we’ll be back next week.


Nothing in this video should be construed as an offer to sell securities or a solicitation of an offer to buy securities. All investment involves risk and the possibility of loss, including loss of principal, and neither past performance nor forward looking information is a guarantee of future results.

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