Though deal flow has been light in July, investor appetite for paper has pushed yields on new loans tighter. In particular, OIDs (original issue discounts) have declined to an average of 223 bps (reflecting an issue price of 97.77), down from 403 bps in June. Up until this month, OIDs were climbing steadily since earlier in the year, and so despite the decline in the size of OIDs in July, they remain far above pre-COVID levels.

There has been a similar though less pronounced trend with first-lien institutional loan margins, which climbed as high as 481 bps in June, before tightening to 445 bps on average in July.

Loan investors, like CLOs, have sought larger OIDs in recent months as the market repriced risk and demanded higher yields in the COVID-19 environment.

The range of OIDs in July has been relatively tight compared to prior months, ranging from 97 (and margin of Euribor+475) on Cerelia Participation Holding and 97 (E+450) on Dedalus to 98.5 (E+425) on Angus Chemical. In contrast, the range of OIDs in June was much wider, ranging from 92 (E+800) on Hurtigruten AS and 93.50 (E+400) on Boels Rental and 93.50 (E+500) on Kantar to 99.50 (E+325) on Nord Anglia Education.

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Colm (C.J.) Doherty Global Head of Primary Market Analysis Debtwire

Colm Doherty is Debtwire’s Global Head of Primary Market Analysis. He is responsible for leading the production of primary market analysis and reports focused on the leveraged loan and high yield bond markets. Prior to joining Debtwire, Colm was Director of Analysis at Thomson Reuters LPC covering leveraged loans, CLOs and high yield bonds.

Colm has a B.A. in Economics & Legal Science from National University of Ireland Galway and an MSc. in Accounting & Finance from Ulster University.