Capital Markets Update – Week of October 16, 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.

Hello everyone, this is Charlie Lienau, Director for the Capital Markets team here at Cadence. Thank you very much for tuning into this week’s market update for the week ending October 16, 2020 where we provide news and insights that are relevant to our short-term note program market.

Quick snapshot on the broader public markets for this last week. After a strong opening to the week all major US indices suffered three consecutive days of losses from Tuesday to Thursday. Weakness came mainly amid the uncertainties around coronavirus stimulus package as lawmakers continue sending mix signals on progress towards a deal, as well as general fears of the pandemic worsening in the United States and around the world. Street talk on stimulus package and upcoming elections, amongst other macro factors, has been diverting attention away from the corporate earnings season, which began this week but had little impact on the broader market performance. To close the week, today stocks were on the rise and with major indices poised to end the week at or slightly up, mostly pushed by strong U.S. retail sales data. Retail sales jumped 1.9% in September, outperforming a Dow Jones estimate of 0.7%.

Switching gears to the fixed income markets, the 10-year treasury is now hovering around 0.74%, which is about 5 bps tighter than last Friday, reflecting higher demand amidst the increased volatility.

On the primary markets side, U.S. leveraged loan funds saw a $181 million inflow for the week ended Oct. 14, according to Refinitiv Lipper, which constitutes the first inflow since Aug. 5, and the largest since Jan. 15. In terms of deals, on the IG market we saw $4.9bn price, with the HY pricing a total of $5.0bn. In terms of spreads we saw a IG spread remain flat around 126, and saw a slight widening from 469 to 475 for the HY index.

Now, diving into the STNP Market this week. In terms of flows, we had net inflows for 3 out of 4 days for this shortened week, resulting in strong net inflows for the week overall, providing additional demand to our transactions.

This week we closed three transactions, which had been fully subscribed by last week.

  • First up we had ZayZoon, with 18-C, for $500,000, which represented a $120,000 upsize from the last transaction. This 3-month note is a rollover from 18-B and came with an APY of 11.75%, implying a 25bps negative new issue premium from the last offering.
  • Next we had 11-I with Axle Payments. This 1-month subordinate note priced for $500,000 with an APY of 12.25%, which implied a 50bps negative concession to our last deal with them on the platform, and represented a $200,000 upsize from 11-H.
  • Finally, we had 7-K with Thunderroad. This 3-month note priced for $1,950,000 with an APY of 11.75%, as a rollover to 7-J, and implied a 25bps premium to this last offering.

This week we are live with:

  • 12-E, with SALT with a $2.4 million 3-month rollover which carries an APY of 9.00%. This offering is currently ~60% subscribed and is slated to close on Thursday October 22nd.
  • Pollen VC, with 3-AA, where we went live with an $1,400,000 3-month offering, with an APY of 9.00% which was fully subscribed within the day by existing rollover investors. This implied 0% new issue premium to the last note.
  • This week we were also live with Pulse Medical Finance, with 17-C. This 6-month offering is fully funded at $2 million, with both rollover and new investors participating. This transaction comes with an APY of 13.50%, implying no new issue concession to 17-B, but represents a $750,000 upsize from the last transaction.

And finally, this week we also launched an auction for 5-L with a subordinate note for Northwest Capital for $4.4 million. We will be launching this note early next week. 

As we see many deals on the platform remain subscribed and oversubscribed, we continue to work hard on onboarding new originators to the platform and are expecting a few new strategic partnerships to be announced in the next weeks.  Every one of these new programs coming online will have daily or weekly monitoring and we have surveillance reports in the works for the remaining active originators that currently do not have any as of yet which we will be hopefully releasing in the next weeks for our subscribed accredited investors on our platform.

That is all from us for this update. Thanks again for tuning in and 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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