A primer brought to you by S & P Global that dissects all aspects of syndicated loans.

Syndicated Loans: The Market and the Mechanics, a primer created for the Loan Market participant.

The U.S. senior secured institutional term loan asset class provides a number of benefits to investors, including a floating-rate coupon, a large and liquid market, lower credit and interest-rate risk than high-yield bonds, and many ways to gain exposure.

Investors in loans like their short duration, high position in the capital structure and their floating-rate attribute that has resulted in better returns than other fixed income instruments. LSTA Executive Director Bram Smith met with four leading loan market participants to discuss the current state of the market, the issues it faces, and how senior loans can enhance institutional portfolios.

After rallying across the last two months of 2023, loans took a breather in January as the market digested a wave of repricings and refinancings sparked by strong investor demand, scant new lending, and the priciest secondary market since May 2022.

1Q24 loan trading volume surged 25% to a four-quarter high of $205 billion, according to the LSTA’s Secondary Trade Data Study.  1Q24 secondary activity represented the first $200 billion-plus showing in a year and the first quarterly increase in trading volume since last year.

Over the past three decades, the senior loan market has grown  from relatively modest beginnings into an essential element of corporate finance, playing a core-plus role in institutional fixed-income allocations.  In 2018, the S&P/LSTA Leveraged Loan Index, an indicator of market size, surpassed $1 trillion in outstandings.

The LSTA presents the results of the first quarter Secondary Trading & Settlement Study.  Presented by Ted Basta, EVP of Market Analytics and Investor Strategy, and Hugo Pereira, VP of Analytics and Strategy of the LSTA.