Although 2015 was the first year since 2008 that high yield bond and some loan indices registered losses for investors, market observers paint a cautiously optimistic picture that - outside of the energy space - investors see potential for a market rebound this year.
Over the past year, insurance companies and other non-banking entities with extensive experience investing in collateralized loan obligations have shown considerable interest in providing to non-traditional loan facilities to finance the economic interest in the credit risk that they must hold in their deals under the impending U.S. risk retention rules.
Oil- and gas-industry lenders Hancock Holding, Associated Banc-Corp and BOK Financial recently announced upsized loan-loss provisions, a harbinger of warnings analysts expect to see more of in forthcoming bank earnings reports.
According to Wells Fargo, 30 managers who issued CLOs in 2014 took a breather from deals last year. Meanwhile, the number of first-time CLO issuers dwindled to six the lowest rookie pool of inaugural issuers in five years.
Recently passed legislation by Congress that eliminates the tax-free element of spinning off corporate real estate into separate and publicly-traded REITs could delay the company's bankruptcy exit.
Bonds and loans issued by junk-rated companies posted their worst performances since the financial crisis, though most of the pain was felt by holders of the riskiest notes and syndicated bank facilities, those rated triple-C.
Hancock Holding will more than double the size of its loan-loss allowance for energy credits in the fourth quarter, compared to a quarter earlier, covering about 5% of the $21.6 billion-asset company's energy book, compared to just 2% at Sept. 30.
Third Avenue Focused Credit's holdings were far riskier, and more concentrated, than most other high yield bond funds. Still, other fund managers are now fielding calls from investors who want to understand what happened.
The Office of Financial Research reports that levels of debt-to-GDP have risen to pre-crisis highs, and that the resilience in most of the credit markets today could be short-lived as creditors reconsider their exposure.
The level of debt financing is unclear for the planned $13.9 billion all-cash acquisition of Keurig Green Mountain Inc. But early speculation is that the company will only minimally impact the net leverage of its new investment-grade rated owners.
A slowdown in refinancing activity will mean a slowdown in issuance of leveraged loans and high yield bonds in 2016, according to Michael Contopoulos, head of U.S. high yield and leveraged loan strategy at Bank of America Merrill Lynch.
Financing the 5% stake that CLO managers will have to retain in CLOs issued after December 2016 is developing as a crucial strategy for cost-effectively issuing and servicing portfolios.
JPMorgan Chase is teaming up with OnDeck Capital to build an online platform designed to approve small-business owners' loan applications in a matter of minutes. New York-based OnDeck, which uses a proprietary scoring model to assess the creditworthiness of borrowers, said that the partnership will be launched in 2016.
The Federal Reserve Board will likely subject large banks to higher minimum capital levels as part of their annual stress tests than the capital requirements that have resulted from past tests, says Fed Gov. Daniel Tarullo.
Leverage, a joint venture formed by the League of Southeastern Credit Unions and Capital Growth Solutions, launched Monday with the mission to help small credit unions that lack expertise in SBA lending jump into the booming 7(a) market.