Capital Markets Update – Week of October 2, 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 Charlie’s most recent 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 Charlie Lienau, Director for the Capital Markets team here at Percent. Thank you very much for tuning into this week’s market update for the week ending October 2, 2020 where we provide news and insights that are relevant to our short-term note program market.

Quick snapshot on the broader public markets for this last week. The health and economic effects of COVID-19 continue to be felt across different areas of the United States and in the world, providing added volatility to the equity markets. As Wall Street continues to keep a close eye on unemployment metrics as lawmakers have yet to move forward on a new coronavirus stimulus package, market sentiment improved towards the start of the week with the release of select economic data, with a report from ADP showing better than expected private-sector jobs growth. However, towards the end of the week, following a contentious Presidential debate, laying uncertainty around the election process and outcome added to news of President Trump testing positive for Coronavirus, has led to a slight sell-off in stock performance, leaving the week by this early Friday afternoon, with only slight increases in performance by all major indices for the week. Added to the negative tone for end of the week, the Labor Department also reported today that payrolls increased by only 661,000, below the 800,000 estimate. Switching gears to the fixed income markets, benchmark treasuries yields remained quite flat for the week, with the 5-year and 10-year now hovering right around 0.27% and 0.68%, respectively which is about 1 bps higher than Monday open. On the primary markets side, outflows continued this week as investors pulled ~$3.6 billion from U.S. high-yield funds while inflows continued into investment-grade funds, with ~$2.1 billion added. In terms of deals this week high-grade dealers were calling for about $25 billion in supply (but still considerations on a potentially slower week given the Yom Kippur holiday) and finally saw $14.7bn in new deals on the IG side. On the HY side we saw a total of $4.4bn price. Despite flows, in terms of spreads we saw a 5bps widening in the IG spread from 135 to 140, and a tightening from 537 to 510 in the HY index.

Now, diving into the STNP Market this week. In terms of flows, we have net inflows for the majority of the days this week, resulting in slight net inflows for the week overall, adding demand to our transactions.

This week we closed two transactions, which had been fully subscribed by last week.

  • 9-J, with Zinobe for $1,240,000. This 2-month note is a rollover from 9-I and came with an APY of 13.50%, implying a 50bps negative new issue premium from the last offering.
  • 6-H with Arctos, we closed a new 9-month note for $1,300,000 that had a 11.50% APY, which implied 0bps premium to our last deal with them on the platform and represented a $520,000 upsize from 6-F.

This week we are live with:

  • 15-F, with Cherry, an installment financing company, with a $200,000 9-month rollover which came with an APY of 10.50%, implying a 50bps negative new issue premium from the last offering. This offering was fully subscribed mostly by rollover investors.
  • 4-I with Aspiria, a small-business lender in Mexico, currently live with a $600,000 9-month new offering 11.50% APY, which implied a 50bps negative new issue premium to our last deal with Aspiria on the platform. As of Friday afternoon this transaction is 94% subscribed and is expected to close next week on October 6th.
  • Wall Street Funding with 2-N, with a $4,000,000 133 day note which came with an APY of 15.00%, implying a 25bps new issue premium from the2-L, the note being rolled over. This offering was fully subscribed by rollover and new investors.
  • Pollen VC, with 3-Z, where we went live with an $800,000 3-month offering, with an APY of 9.00% which was fully subscribed within the day by existing rollover investors.

And finally, this week we also launched auctions for 11-I with Axle Payments for $500,000, 18-C with ZayZoon for $450,000, and 7-K with Thunderroad for $1,950,000. We will be launching these notes early next week 

As we see many deals on the platform remain subscribed and oversubscribed, we continue to work hard on onboarding new originators to the platform and are expecting new strategic partnerships to be announced in mid to end of October. 

That is all from us for this update. Thanks again for tuning in and 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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