Capital Markets Update – Week of November 20, 2020 (audio)

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

Listen below for Charlie’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.

Hi everyone, this is Charlie Lienau, Director on the Capital Markets team here at Cadence. I would like to thank everyone who is tuning into this week’s market update for the week ending November 20, 2020. Let us get started!

Looking at the equity market for the week, the major US indexes were about flat for the week entering Friday as the number of COVID-19 cases continues increasing in the US and internationally, which slowed the market rally we had seen since the US Presidential elections. After working closely with the Fed through multiple liquidity and lending solutions for this year, Treasury Secretary Steven Mnuchin stated yesterday that Treasury would not be seeking to continue extending a series of lending programs instituted during the beginning of the pandemic. However, given quickly rising negative reactions, he re-stated on Friday that there was still plenty of liquidity available to provide funding where it was needed. On a more positive note, following positive trial results with their COVID-19 vaccine, Pfizer and BioNTech, stated that they would apply for an emergency use authorization for their vaccine to the FDA this week. Switching gears to the fixed income markets, benchmark treasuries tightened throughout the week, with the 5-year and 10-year now hovering right around 0.39% and 0.86%, which is roughly 2 and 5 bps lower than Monday open, respectively. For primary markets, we saw $40bn price in the IG markets across six deals and $13.3bn price on the HY side, as of Friday open. In terms of flows, US HY funds inflows fell to $490m this week. In terms of spreads, we saw the IG spread tighten 6bps from 115 to 109 and the HY spread also tighten, in this case from 435 to 422.

Now, diving into our Short-Term Note Program. We are proud to share every day this week the Cadence platform had net positive flows, attesting to the ongoing demand and growth of our investor base.

This week we closed one transaction, an inaugural transaction for 20-A with The Smarter Merchant.  The Smarter Merchant is a leading technology and data driven platform for short term funding to small and medium sized merchants seeking cash flow to meet operational and working capital needs. Founded in 2013, The Smarter Merchant has originated $40MM in the last 18 months alone, with sustained growth expected in 2021 and beyond. For the inaugural note on our platform, we reached the target goal of $1.5mm with a 15.75% APY, for a 9-month amortizing note. As we continue to onboard new originators on to our platform in the upcoming weeks, we are excited for this fantastic start of TSM with the Cadence team.

This week we are also live with:

  • 3-AC with Pollen, a $1.4 million 3-month rollover which came with an APY of 9.00%. This offering was fully subscribed within 24 hours of launching by rollover investors. The deal is set to formally close next Monday.
  • 17-D with Pulse Medical Finance, a $2,000,000, 6-month note offering at 13.25% APY, implying a 25bps negative new issue premium from our previous deal. This note was also rapidly funded by rollover investors across 2 days of syndication. This transaction is set to close next Wednesday.
  • 5-M with Northwest Capital, a $4,400,000, 3-month subordinate offering at 12.50% APY, implying a 50bps negative new issue premium from our previous deal. This note was also rapidly funded by both rollover and auction participants across 2 days of syndication. This transaction is set to close next Friday.
  • 9-K with Zinobe, a $1,240,000, 2-month note offering at 13.00% APY, implying a 50bps negative new issue premium from our previous deal. This note was also rapidly funded by rollover investors in only 12 hours of syndication. This transaction is set to close next Monday the 30th.
  • 6-J, with Arctos Capital, seeking $1.7 million with a 9-month amortizing note, rolling over from 6-H. This transactions represents $400,000 upsize from 6-H and carries an APY of 11.25%, implying a 25bps negative new issue premium. Currently, the transaction is 74% funded and is set to close on November 30th.

In other news, this week we are also open with our first Cadence Prime transaction, for our longstanding originator Wall Street Funding. Our Cadence Prime platform offers more bespoke structures that are typically slightly longer in duration. This opportunity is open for investment now and is looking to close on November 30. More information available on the deal page.

This week we will also be launching an auction for 15-H, with Cherry, who continues to grow in the Med Spa vertical. The auction will remain open into early next week and the notes are expected to launch shortly after.

That is all from us for this update. Thank you again for tuning in and we look forward to catching up with you again soon.

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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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