Capital Markets Update – Week of June 26, 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 STNP market update for the week ending June 26, 2020, where we provide news and insights that are relevant to our short-term note program market.

Taking a quick peek at the broader markets this week, U.S. equities were off to a strong start on Monday and Tuesday with the NASDAQ and a variety of tech stocks leading all-time highs before all the headlines around COVID-19 cases spiking in a variety of states began weighing in to the overall risk sentiment. All the major indices have opened up in negative territory this morning, so it does look like we’ll have a down week here as the market digests what all this could mean for the shape of the recovery going forward. 

On the fixed-income side of the market, treasuries rallied as they typically inversely kind of wax and wane with the risk market, so no surprise in the flight to quality bid here. The 10-year is hovering right around %0.65 and in the same light, spreads in both IG and high yield markets ID wide and over the course of the week to the tune of about 10 basis points at the higher end of the CreditSpectrum in 30 basis points of the lower end. But all still certainly well below the wides we saw back in late March.

All the uncertainties did put a lid on opportunistic issuance after Monday, so primary volumes were off expectations across the board. However, we have seen a number of distressed and fallen angel debt offering successfully priced this week from the likes of American Airlines and Occidental, and there are a number of exchanges under way, as well. So appetite for credit risk with strong security packages and perhaps a bit more structured in nature continue to be en vogue.

Zooming into our corner of the universe here in STNP Market, we had just over $3 million priced this week, which brings our year-to-date total just shy of $74 million and over $117 million since inception. We also reached another critical milestone having closed the 100th note on our platform. So, definitely a heartfelt thank you to all of our supportive investors and originators.

Now, some quick observations worth noting for this week. Inflows continue to remain strong with another roughly half a million coming into the platform and have found their way into a few live  offerings in the market this week. And in terms of demand across the board, we do continue to run at either full or oversubscriptions, as we have for the past several weeks, which has led to some spread compression, as rates for some programs have tightened nearly all the way back to pre COVID-19 levels.

We think this will have a material impact on prompting a number of existing and new originators to test both larger offerings and slightly longer durations this summer to take advantage of, what I think, is a pretty constructive tone.

Taking a look at the offerings that priced this week… On Monday, we closed 12-C with Salt Lending. This was a rollover offering from a recent three months $750K, 12-B note issued last month, which was opportunistically called to test a significant upsize.

After receiving a strong response in the Dutch auction a few weeks ago, we launched the same structure at the same 9.25% rate as the prior note and ultimately closed $1.645 million, which represented a very nice hundred and twenty percent upsize. 

This note is backed by a distinct cool of crypto-collateralized loans, and surveillance reports are readily available for this offering.

And then on Tuesday 3-S closed with Pollen VC, which was a $1.4 million, three-month callable note that cracked through the double-digit barrier to price at 9.5%. This offering replaced a  10.5% note in price to full 50 basis points inside of the most recent note from a few weeks ago. So negative net concession here, and the trend is certainly continuing. And we fully anticipate this program to materially grow over the next month or so.

Outside of these pricings this week, we have been actively syndicating a few other offerings for Northwest Capital, Zinobe and Arctos which have all been met with continued strong investor demand. And as of this recording there is some allocation remaining in Arctos that is set to close on Tuesday next week.

Outside of these be conducted another Dutch auction this week with Cherry, Pollen, and Aspiria, so you should expect to see these hit the market over the next few days to close in early July. 

On the pipeline front, we are roughly two weeks away from bringing to auction a new inaugural offering for a new originator and have another one likely to launch the week after, so July is shaping up to be a very busy month with new deal flow that we’re, of course, very excited about, as they will represent brand new underlying asset classes as well to further help investors construct meaningfully diversified portfolios.

And last but certainly not least, we recently launched surveillance reports for Northwest Capital to bring our grand total to seven originators, providing at least weekly, and in many cases, daily performance data on their underlying asset portfolios. We definitely plan to continue building on this transparency in the coming quarter, as we’ve made some key hires across-the-board internally to ramp up development, automated processes and shorten up release cycles.

That does it for this week, but thanks so much for tuning in, and we look forward to catching up with you again next Friday.


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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