Every month, the capital markets team puts together an update that takes a look back at the previous month’s dealflow, while also highlighting the upcoming deal pipeline.
Please find Cadence’s Short Term Note Program (STNP) monthly market update for July 2020 below.
Although major indexes had positive month-to-month performance, volatility persisted on renewed concerns surrounding a surge in coronavirus cases across several states. Overall market performance continued to seesaw in June, with one week’s equity gains reversed the following week. On the economic front, the Federal Reserve announced plans to begin purchases of individual corporate bonds. This move came one month after it began buying corporate-credit ETFs through the program. Furthermore, some recent economic reports, such as May consumer spending, some housing numbers, and manufacturing activity, have given rise to the notion that the recovery is underway but uncertainty around the path of the virus, and impacts on pace of reopening and economic activity, will continue to be a dominant headwind to further outperformance.
June saw a reversal of the consolidation experienced since April as the STNP market modestly grew over the month. As of July 1st, a total of $31.5mm of notes were outstanding following $16.8mm in issuance against $14.8mm in note amortizations or repayments.
- Less than 11 months after publicly launching our retail investment platform, we successfully funded our 100th offering, achieving a critical milestone. Our STNP issuance since inception stands at $123.0mm, compared to $106.2mm at the time of last month’s update. Issuance has spanned 104 individual structured note offerings from 12 active originators.
- STNPs issued in June had a weighted average APY of ~13.2% (with no fees to investors) and average tenors still hovering a little below the 75 days mark. This compares to a new issue weighted average APY for May of ~12.8%.
- Cadence has officially returned over $2.4mm in aggregate interest payments since inception to our growing investor base.
STNPs continue to provide investors with a compelling structured fixed income product offering sustainable returns and ample inherent liquidity. Cadence welcomes new accredited investors and originators seeking alternative solutions in a period of ongoing economic uncertainty.
June Capital Markets Activity
In the month of June, we continued to focus most of our attention on analyzing and monitoring underlying asset performance for all our originator partners. We are now publishing periodic surveillance reports for seven originators on the Cadence platform and expect to have a few more available by the end of July. You can find more information on how to best navigate these reports stored in the Originator Profile page in one of our recent insights articles titled Delivering on Transparency with our Latest Surveillance Reports.
We successfully priced 11 offerings across our STNPs to land at $16.8mm, bringing our YTD 2020 total to $79.5mm.
- We were able to meet or increase target transaction sizes in 9 out of the 11 transactions issued this month. Pending market conditions, we are planning to announce a partnership with two new originator partners during the month of July that will lead to two new inaugural offerings slated to close by the end of the month.
- Offerings ranged widely in terms of price and size, from a $3.9 million subordinate 3-month note with Northwest Capital pricing at 13.000%, to a $780,000 senior 10-month note with Arctos Capital pricing at 11.500%.
In the month of July we are planning on launching our originator portal. This web-based software-as-a-service application for our originator partners will greatly streamline the process of managing our note programs and allow for a more effective way for originators to provide information to our investors.
Please see below our 1-month projected and historical issuance calendars along with a few charts highlighting STNP market activity since inception for further insight.
STNP Market Activity
Should you have any questions or would like to learn more about Cadence, our issuances or the STNP market, please do not hesitate to reach out to us.
And of course, nothing in this post 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.