Capital Markets Update – Week of December 11, 2020 (audio)

In an effort to provide even greater transparency around our offerings and our investment platform, the capital markets team provides weekly updates.

Listen below for Paola’s views on our short-term note program and the current private credit landscape from Percent’s perspective.

Please find the transcript for this video below.

 

 

Hi everyone, this is Paola Rios, Syndication analyst on the Capital Markets team here at Percent. I would like to thank everyone who is tuning into this week’s market update for the week ending December 11, 2020. Let us get started!

Looking at the equity market, the U.S. major indexes experienced volatile intraday highs and modest closes for the week amidst COVID-19 cases setting new records in the US and globally, highly anticipated IPOs with high valuations, promising developments on a vaccine, and not much progress on a stimulus package.

The Nasdaq started the week strong and on Tuesday it was higher for the 4th straight day. However, the strength was short lived, as the index saw its worst daily performance since October on Wednesday and proceeded to a modest close on Thursday. This week we saw busy markets with the IPOs for Doordash and Airbnb, amongst other, with stock prices soaring during their first trading sessions. These transactions reflected a bullish market, despite criticism of how a post pandemic market could impact the dining, travel and leisure industries. These sectors have beared the brunt of lockdowns due to COVID-19 but new developments on the vaccine front could bring back a sense of normalcy, as we saw the FDA panel give green light to Pfizer’s COVID vaccine for those of 16 years of age and older. In other news, Congress still remains divided as Senate Majority Leader Mitch McConnell rejects a bipartisan $908B COVID relief plan and the House pushes negotiations until next week. With this news, the Dow Jones Industrial Average and S&P 500 fell on Friday open, and were on pace for their first weekly loss in three weeks, as the outlook for additional fiscal stimulus remains uncertain.

Switching gears to the fixed income markets, benchmark treasuries tightened slightly throughout the week, with the 5-year and 10-year now hovering right around 0.39% and .92%, which is roughly 1 and 2 bps lower than Monday open, respectively. In the primary markets, High-yield bonds, with more than $82.4 billion outstanding, are trading above upcoming call prices, making it attractive for issuers to redeem the securities in the next three months. U.S Corporate high-yield funds reported inflows of $0.2 million for the week ending December 9th, after seeing an outflow of $1.39bn last week, and U.S. Corporate investment-grade funds inflows fell to $2.9B from the $4.81bn added the week before. In term of volumes, IG funds priced $20.65bn and on the HY side we saw a total of $10.15bn priced for the week as of Thursday.

Now, diving into our Short-Term Note Program. In terms of flows, after last week’s prepayment of Medium Term Small Business Financing 2-M and Short Term Small Business Financing 2-N, we saw an uptick in outflows, and we expect a decrease in inflows as the holiday season approaches.

This week we also closed three transactions,

  • 15-H, originated by Cherry Technologies closed at $209,000. This 9-month note is a rollover from 15-G and was syndicated with an APY of 9.75%, implying a 50 bps negative new issue premium from the last offering. The new issue represented an upsize of $24,000, a reflection of an uptick in Cherry’s originations volumes as they continue to grow their vertical in the med-spa space.
  • 11-K, with Axle is a subordinate 2-month note offering with a 11.25% APY which closed at $1,350,000 reflecting an upsize of $350,000 from our previous close. The auction we held for this note was also the most participated auction we have had to date, an attestation to the gaining traction of our auctions and higher engagement from our investors who are actively voicing their risk tolerance via our auctions.
  • ZayZoon, a provider of earned wage advances as a payroll feature refinanced and roll 18-D into 18-E, a 3 month note, which closed at $925,000 at 11.75% APY.  This offering also reflects an upsize of $175,000. This transaction comes with a negative 25bps new issue premium.
  • Originated by ThunderRoad, 7-L is set to close at $1,950,000 on December 12th. However, since the 12th falls on a Saturday, we will settle the deal Monday the 14th. Although not finalized, given the number of investors in our order book, 7-L is expected to be the 3rd most participated note, with over 300 investors expected to participate in this offering.

This week we are also live with:

  • 20-B, originated by The Smarter Merchant, a $2,000,000, 9-month rollover with an APY of 15.50%. This offering reflects an upsize of $500,000 and a 25-bps negative new issue premium from 20-A.

Looking ahead to next week’s deals, this week we will be launching an auction for 6-K, with Arctos Capital for $2 million.

That is all from us for this update. Thank you again for tuning in and we look forward to catching up with you again soon.

 

 

 

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Nothing in this video 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.

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