Why are high yield volumes strong despite fund outflows? (Part 5)

Continued from Part 4

Reverse flex

Investors seem extremely hungry for new deals, which has led to many transactions “reverse-flexing.” “Flex” means that the issuer can offer a larger discount to investors to incentivize them to buy the loan. “Reverse flex” means that the original discount offered was actually reduced given the warm investor reception for the deal.

SNLN and BKLN 2013-08-09Enlarge Graph

Opportunistic issuers back in the game

Many companies that had planned to come to market after the August break decided to accelerate the timeline and tap the market earlier, given the strong conditions.

Along the same lines, much opportunistic repricing has hit the market and successfully lowered the cost of debt for the issuer. Out of the 16 deals last week, five were repricings that investors embraced.

CLO issuance remains full steam ahead

Last week was strong as well for CLO (collateralized loan obligations, pools of loans divided into tranches of various ratings) issuance. A total of four CLOs priced last week for a total volume of c. $1.83 billion. Year-to-date issuance stands at almost $47 billion across 96 deals. Of these 96, eight priced in July.

So is the market overstretched? Read on for our assessment of what may happen in August

Continue to Part 6