Capital Markets Update – Week of October 30, 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 Daniel’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 Daniel DeMatos, a Securitization Analyst on the Capital Markets team here at Percent. I want to welcome everyone who is listening to this week’s market update for the week ending October 30, 2020. Let’s walk through news and insights that are relevant to credit markets and Percent’s investment platform.

Getting started, U.S. economic news was generally very good this week. An advance read on U.S. GDP in the third quarter came in at the high end of expectations. Similarly positive, a report on durable goods orders beat expectations as did initial unemployment claims and a report on personal incomes and personal consumption expenditures. That said, a domestic consumer confidence measure also released this week came in little changed from the prior month.

Shifting to a quick snapshot of the public equity and debt markets. Rising COVID-19 cases in the U.S. and Europe and the resumption of some restrictions on business and movement, especially in Europe, added volatility to the equity markets. The S&P 500 opened Friday down 5% for the week so far while the CBOE Volatility Index, or VIX, rose from 30 where it started the week to 40 by Friday morning

In the fixed income markets, torn between positive rear-view economic data and the grim outlook for COVID infections, benchmark treasury yields remained quite flat for the week, with the 5-year and 10-year now hovering right around 0.38% and 0.86%, respectively, rising after hitting lows of the week on Wednesday.

In corporate credit, investors pulled ~$2.5 billion from U.S. high-yield funds this week. IG spreads saw a 2bp widening from 123 to 125, and in line with investor outflows the HY index saw a larger 39bp widening from 468 to 507.

Strength was evident in esoteric ABS markets though. A Verizon deal backed by device payment plans priced below guidance this week. Further, a whole business securitization backed by franchise royalties for auto related franchise systems like Maaco and Meineke priced about 55bps tighter than a similar deal by the same sponsor in June.

Now, diving into Percent’s Short-Term Note Program Market this week. In terms of flows, we saw net inflows overall for the week especially as new deals closed on Monday and Tuesday.

This week we closed two transactions.

  • 17-C, with originator partner PULSE Medical Finance for $2,000,000. This 6-month note is an upsized refinancing of 17-B and priced with an annual percentage yield of 13.50%, unchanged from the last offering.
  • 5-L, with Northwest Capital also closed this week at $4,400,000. This 3 month note carried a 13.00% annual percentage yield, which was also unchanged from the last deal with Northwest Capital syndicated on the platform which closed in August.

We are also live in syndication with:

  • 1-X, with SellersFunding, an e-commerce merchant specialty finance company, raising $2,000,000 through a 9-month note carrying an APY of 9.00%. As of Friday afternoon this transaction is 70% subscribed and is expected to close next week on November 3rd.
  • 6-I with Arctos, a finance company in the digital currency and cryptoasset space, live with a $600,000 3-month note offering 9.25% APY. This represents a 25bp tightening from a previous deal closed on September 2nd. This note was fully subscribed by existing investors in the prior offering.
  • Cherry, a consumer point-of-sale installment lender, saw their $185,000 9-month note, 15-G fully subscribed by existing investors. That note comes with an APY of 10.25%, also a 25bps tightening compared to their previous note.

And finally, this week we also launched auctions for 3-AB with Pollen VC for $1,100,000, 18-D with ZayZoon for $500,000, and 11-J with Axle Payments for $750,000. We will be launching these notes early next week.

Relatively robust market conditions mean we continue to aim for two new originator partnerships to be announced in the coming weeks. 

That is all from us for this update. Thanks again for tuning in and we hope to connect with you again next week.

 

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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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