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Refi Activity Drives Jump in Leveraged Loan Issuance

August 07, 2017, 08:00 AM
Filed Under: Economic Commentary

Year-to-date leveraged loan issuance stands at $772 billion, easily outstripping the $424 billion posted over the same period last year, according to the latest monthly data from Thomson Reuters LPC.

Refinancing activity has driven the jump in lending activity this year, but unlike last year, a large share of leveraged volume is driven by institutional volume. More than two thirds of leveraged loan volume in July made up of refinancing activity, as issuers take advantage of market demand for yield and cut spreads. New money volume stands at $228 billion year to date.

According to Thomson Reuters Leveraged Loan Monthly for July, there has been $528 billion of institutional loan issuance recorded so far this year, eclipsing the $177 billion of volume recorded over the same period last year. U.S. high yield bond issuance dropped to $11 billion in July, taking YTD volume past $162 billion. Despite the slowdown in July, issuance for the year is running 21% ahead of last year’s.

"Refinancing activity remains the driving force behind U.S. institutional issuance this year, with $381 billion of volume, making up a 72% share of YTD issuance," the report states. "After comprising 20% of issuance at the beginning of the year, the new-money share of institutional volume has ticked up to 36% in 2Q, and 33% in July. The size of the institutional loan market increased to $928 billion in July, an increase of $2.3 billion over the prior month. Outstandings have increased by over $47 billion this year."

M&A leveraged loan volume stands at $143 billion, year-to-date, down 6% from the $144 billion recorded over the same period last year. Middle market lending volume stands at $85 billion year-to-date, with large middle market making up 80% of volume and traditional middle market adding $17 billion.

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