Loan Growth Slowing as Quarter Ends

During much of the first quarter, bankers and issuers pounded the loan market with repricing deals, which got done, one after another, despite the requisite grumbling from investors.

What a difference pushback makes. The loan market, for the past two weeks, has gone quiet.

"The pace of repricings was like getting machine-gunned," a Boston investor said. "It turned off market participants and was a highly negative experience. It took so much of their time, they had little energy for other new issues."

For the week ending March 11, leveraged loan volume hit $16.7 billion, the vast majority from repricings, according to Bloomberg. The week ending March 4, the number was $17.1 billion. By last Thursday, only three new deals totaling $655 million had appeared on the primary loan calendar.

The market all but stopped because issuers peddling these repricing deals are no longer in the driver's seat. By Thursday, three refinancings totaling more than $4.1 billion were pulled from the primary loan calendar. Last week, when the tides turned, more than $6.4 billion worth of these deals were yanked from the market.

The slowdown hit because of an "aggressive pace of repricings and the loosening of structures," among other things, a Toronto investor said. "World events helped shut the door, and we saw the result — deals pulled due to market conditions."

"The nominal yields of [repricings] apparently were not working for marginal buyers, like high-yield funds," the Boston investor said. "The market is adjusting."

The slowdown has affected the secondary loan market. Some participants say the bank loan market will be slow for the next few weeks. Some deals will come but most issuers will be hesitant to price a loan with negative headlines coming from around the globe.

"We hope this market pause will lead to the same shopping spree investors enjoyed last year," said Randy Schwimmer, the head of capital markets with Churchill Financial. "We worry that cravings for security and yield will eventually send investors scurrying back to unproductive repricings. One thing we've learned about recent news is that no one can predict what will happen next."

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