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.

The secondary loan market returned to its rallying ways in April after taking something of a breather in March. The S&P/LSTA Leveraged Loan Index (LLI) returned 0.51% in April after running ever so slightly in the red (-0.0025%) the month prior – the market’s first “negative” reading in 12 months.

LSTA secondary loan trading volume surged during the first quarter of 2021, rising 27% to $209B. First quarter’s tally was the second busiest on record, just 16% short of first quarter 2020, where volume totaled $250B (including March’s record $119B in activity).

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.

This presentation is from our first quarter 2021 LSTA Secondary Trading & Settlement Study.  Presented by Ted Basta, LSTA EVP –Analysis & Investor Strategy.