November 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.

Please find Cadence’s Short Term Note Program (STNP) monthly market update for November 2020 below.


Market Commentary

The health and economic effects of COVID-19 continue to be felt across different areas of the United States and across the world, leading to ongoing volatility in the equity and credit markets. The DOW, S&P 500 and NASDAQ all posted their first back-to-back monthly losses since March, with the DOW losing more than 5%, while the S&P 500 and NASDAQ each declined ~3.5% for the month of October. Wall Street strategists had partly attributed a rise in stock prices by the end of September and early October to expectations of Joe Biden winning the U.S. Presidential elections with a Democratic sweep in Congress and better than expected economic results in September. However, during the last week of October, all major indices posted their biggest weekly losses since March, largely driven by news that daily COVID-19 cases were hitting new record highs and less certainty for another round of fiscal stimulus this year. Closing the month, the Commerce Department reported that U.S. GDP rebounded in the third quarter, although economic growth had recovered only two-thirds of the activity lost since COVID-19 erupted in March. As volatility reigns in the market, we saw the VIX index widen from 26.7 points at month open to 38.0 points for month close. On the fixed income side, variability in treasury yields was also evident, with the 5yr and 10yr benchmarks ending October at 0.38% and 0.88%,  logging an 11 and 10bps increase, respectively, since September close. 

The STNP market continued to expand during the month of October. As of November 1st, a total of $32.1mm of notes were outstanding following $18.3mm in issuance against $17.6mm in note amortizations or repayments during October. 

  • Our STNP issuance since inception stands at $181.1mm, compared to $162.8.7mm at the time of last month’s update. Issuance has spanned 144 individual structured note offerings from 14 originators.
  • STNPs issued in October had a weighted average APY of ~12.4% (with no fees to investors) with average tenors hovering a little below the 140 days mark. This compares to a new issue weighted average APY for September of ~11.4%. 
  • Cadence has officially returned over $3.5mm in aggregate interest payments since inception to our growing investor base.
  • With $2.8mm still in workout following missed payments, this represents a 1.56% default rate on issuance since inception.

October Capital Markets Activity

In the month of October, we continued to focus our attention on analyzing and monitoring underlying asset performance for all our originator partners. We are now publishing periodic surveillance reports on eleven originators on the Cadence platform and expect to have a few more available by the end of November. You can find more information on how to best navigate these reports in one of our latest insights articles titled Delivering on Transparency with our Latest Surveillance Reports

We successfully priced 11 offerings across our STNPs to land at $18.3mm, bringing our YTD 2020 total to $137.6mm. 

  • We were able to meet or increase target transaction sizes in 10 out of the 11 transactions issued this month. Pending market conditions, we are planning to announce a partnership with three new originator partners during the month of November that will lead to three new inaugural offerings slated to close by the end of the month.
  • Offerings ranged widely in terms of tenor and size, from a $4.4 million subordinate 3-month note with Northwest Capital pricing at 13.00%, to a $199,000 senior 9-month note with Cherry pricing at 10.50%. 

Please see below our 1-month projected and 2-month 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 do not hesitate to reach out to us.


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. Any decision to invest must be based solely upon the information set forth in the offering documents, regardless of any information that may have been otherwise furnished, including in this update.

Charlie Lienau
Author
Charlie Lienau
Director, Capital Markets
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