March Capital Markets Update

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.

Below you’ll find the Cadence Short Term Note Program (STNP) monthly market update for March 2020.

Market Commentary

Despite broader market volatility, STNP issuance continued at a steady clip with another recording-breaking month. As of March 1st, total STNP notes outstanding reached an all-time high of $35.1mm following $16.1mm in February issuance against $12.4mm in maturities or prepayments.

  • Cadence note issuance since inception now stands at $74.8mm, compared to $58.7mm at the time of last month’s update. Primary activity has spanned 65 individual structured note offerings from 11 active originators. 
  • STNPs continue to offer ~10% APYs (with no fees to investors) and average tenors are still hovering just inside 3 months.
  • Cadence has officially returned over $1mm in aggregate interest payments since inception to our growing investor base and the market continues to run at 0% historical defaults.

The past week’s sell-off in equity and commodity markets, largely driven by a variety of macroeconomic concerns, has subsequently led to an unprecedented flight to quality. Yields on 10-yr US Treasuries have dropped to record lows over the past month, now having tightened ~80 bps YTD to currently hover around 1.10%.

With investors looking for positive real returns, liquidity, and assets subject to less market exposure, interest in STNPs has hit new highs with another record month of issuance. While diversification may have previously been difficult to achieve in this growing market, that is quickly changing. Following inaugural offerings with two new originators in February, active supply-side participants has surpassed 10 non-bank finance companies with differing geographic exposures, asset classes, and degrees of economic sensitivity.

Cadence continues to welcome new investors and originators seeking refuge in a period of market turmoil.


February Primary Activity 

In the month of February, we successfully priced 12 offerings to land at just north of $16.1mm, bringing our YTD 2020 total to $31.3mm.

  • Every one of our origination partners was in the market with us this past month with either inaugural, refinancing or new series deals that continue to enable our investors to easily rebalance and optimize their allocation strategies. 
  • Offerings ranged widely in terms of price and size, from an upsized $6mm 6 month note with Wall Street Funding pricing at 12.000%, to an inaugural 1-month $100k subordinated note with Axle pricing at 19.500%.
  • We are planning to announce partnerships with two new origination partners over the coming weeks that will lead to two new STNP launches and inaugural offerings slated to close by the end of March.

Please see below our 2-month projected and historical issuance calendars along with a few charts highlighting STNP market activity since inception for further insight.

Projected Issuance

Historical Issuance

STNP Market Activity

Should you have any questions or would like to learn more about Cadence, our issuances or the STNP market, please don’t 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.

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Author
Prath Reddy, CFA
Head of Capital Markets
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