September 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 September 2020 below.


Market Commentary

The health and economic effects of COVID-19 continue to be felt across different areas of the United States and in the world, but that has not stopped stocks from striding higher. In August, all major indices had record setting performances. The DOW gained 7.57%, providing the index with its best August performance since 1984 when it gained 9.78%. The S&P 500 gained 7.01% for the month, making it the best August since 1986 when it gained 7.12%. The NASDAQ gained 9.59%, its best monthly performance since 2000 when it gained 11.66%. In the last weeks of August, Jerome Powell, chairman of the Federal Reserve Board, stated that the Fed will let inflation run slightly higher than the traditional 2%, implying rates could stay lower for longer, providing added tailwind for equity performance.  The 5yr and 10yr benchmark Treasuries ended August at 0.27% and 0.71%, respectively, logging 5 and 15 bps increases over the month. Additionally, personal spending rose 1.9% in July, the third month in a row showing growth, indicating that the economic recovery is well underway. However, in the last week of August, initial jobless claims remained above 1 million for the 22nd time in the last 23 weeks, indicating a still stressed labor market. Wall Street is also keeping an eye on the unemployment data as lawmakers have yet to move forward on a new coronavirus stimulus package.

August was a record-breaking month for the STNP market on the Cadence platform. As of September 1st, a total of $30.0mm of notes were outstanding following $24.5mm in issuance against $22.9mm in note amortizations or repayments. With $2.8mm still in workout following missed payments, this represents a 1.83% default rate on issuance since inception.

  • Our STNP issuance since inception stands at $154.7mm, compared to $130.2mm at the time of last month’s update. Issuance has spanned 123 individual structured note offerings from 14 originators.
  • STNPs issued in August had a weighted average APY of ~13.7% (with no fees to investors) with average tenors hovering a little below the 215 days mark. This compares to a new issue weighted average APY for July of ~10.6%.
  • Cadence has officially returned about $2.9mm in aggregate interest payments since inception to our growing investor base.

August Capital Markets Activity

In the month of August, 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 ten originators on the Cadence platform and expect to have a few more available by the end of September. 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 $24.5mm, bringing our YTD 2020 total to $111.1mm.  

  • August witnessed the highest issuance ever in the STNP market. This represents 3.4x what was issued last month, and 50% more than the previous monthly record from February 2020.
  • We issued inaugural transactions for 2 new strategic partnerships, ZayZoon with 18-A for a total $320,000, and Pulse Medical Finance with 17-A for a total of $500,000
  • All of our August transactions were either fully subscribed or oversubscribed
  • Offerings ranged widely in terms of price and size, from a $50,000 senior 1-month subordinate note with Axle to a $10,000,000 senior 12-month amortizing note with Wall Street Funding pricing at 15.75%, which was also the largest single offering ever

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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