With accounts lightening up to make room for Burger King’s jumbo TLB, the average bid of LCD’s flow-name composite slipped 18 bps over the past two trading sessions, to 98.18% of par, from 98.36 on Sept. 23.
Today’s drop marks the third-consecutive decline in the composite, and pushes the average bid to its lowest level since June 27, 2013, when it stood at 97.95.
Among the 15 names in the sample, 12 declined, none advanced and three were unchanged from the previous reading. No loan fell more than three eighths of a point, however.
As today’s flow-name reading suggests, the market has had a little indigestion this week with the $6.75 billion Burger King deal hitting the secondary earlier this afternoon. For reference, the deal is the largest institutional execution since Hilton Worldwide’s $7.6 billion TLB was syndicated at this time last year. Traders also say there’s been some selling from high-yield accounts, a phenomenon that tends to weigh most heavily on large liquid credits, such as those that comprise the flow-name composite.
The new-issue market is bifurcated. Courtesy of a still-robust CLO engine, there is cash to put to work, but accounts can pick and choose their spots. Certain well-known credits have drawn heavy oversubscriptions – and even Burger King, a long-time issuer, managed to clear within talk despite its size, albeit with some investor-friendly structural changes – but for more challenging credits, it’s a different story.
With the average bid falling 18 bps, the average spread to maturity climbed four basis points, to L+441.
By ratings, here’s how bids and the discounted spreads stand:
- 98.68/L+403 to a four-year call for the 10 flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+392.
- 97.2/L+556 for the five loans rated B or lower by one of the agencies; STM in this category is L+538.
Loans vs. bonds
- The average bid of LCD’s flow-name high-yield bonds sunk 144 bps, to 101.58% of par, yielding 6.7%, from 103.02. The gap between the bond yield and discounted loan yield to maturity stands at 236 bps.
- September: The average flow-name loan dropped 91 bps from the final August reading of 99.09.
- Year to date: The average flow-name loan trickled down 175 bps from the final 2013 reading of 99.93.
- Bids slip: The average bid of the 15 flow names fell 18 bps, to 98.18% of par.
- Bid/ask spread dwindles: The average bid/ask spread slid one basis point to, 38 bps.
- Spreads rise: The average spread to maturity – based on axe levels and stated amortization schedules – leaped four basis points, to L+441.