S&P/LSTA Loan Index
S&P/LSTA Loan IndexA 10-year RetrospectiveApril 2007
The bank loan market isn’t always easy to understand. So when I need to make a decisionabout pricing or investing in a loan, Standard & Poor’s Bank Loan andRecovery Ratings give me a better perspective on the loan structureand underlying value. Their reports and analyses give me clarity in a complex market.Speaking of clarity, can someone please translate this memo from IT for me?RATINGSRISK SOLUTIONS EQUITY RESEARCH INDICES DATA SERVICESStandard & Poor’s Bank Loan and Recovery Ratings look beyond default to identify thelikelihood of ultimate recovery. Our loan-specific ratings capture the value of collateral,effect of covenants, and other repayment protection provided specifically to holders ofbank debt. Our ratings are respected by bankers, loan investors, and issuers worldwideacross all sectors.Go to www.bankloanrating.standardandpoors.com for the latest Guide to the U.S. Loan Market,as well as credit ratings and research, criteria, and select commentary.N. America 1.212.438.7884 1.212.438.2715 Europe 44.20.7176.3542www.standardandpoors.comAnalytic services provided by Standard & Poor’s Ratings Services (“Ratings Services”) are the result of separate activities designed to preserve the independence and objectivity ofratings opinions. Credit ratings issued by Ratings Services are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities ormake any other investment decisions. Accordingly, any user of credit ratings issued by Ratings Services should not rely on any such ratings or other opinion issued by Ratings Servicesin making any investment decision. Ratings are based on information received by Ratings Services. Other divisions of Standard & Poor’s may have information that is not availableto Ratings Services. Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-public information received during the ratings process.
ContentsThe S&P/LSTA Loan Index 1997-20063Section 1:Loan Market Overview4Section 2:S&P/LSTA Index Demographics6Section 2:Loan Market Performance8Section 4:Loan Market Versus Other Asset Classes10Appendix:S&P/LSTA Leveraged Loan Index14Key Contacts/Directory16Standard & Poor’s The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 2007 1
The S&P/LSTA Loan Index1997–2006Analytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.comRobert PolenbergNew York(1) 212-438-2717robert polenberg@standardandpoors.comWhen Standard & Poor’s Ratings Services and the Loan Syndications &Trading Association rolled out the S&P/LSTA leveraged loan index in2000, it was back-loaded with four years of data dating to 1997. At the end of2006, the index had accumulated 10 years of performance history for theleveraged loan market. This report describes the leveraged loan market’s performance over the past decade, which has been a time of stupendous growthfor the loan asset class.By way of background, the leveraged loanmarket consists of loans made to speculative-grade borrowers. The vast majority ofloans are senior secured floating-rate paperthat the issuer can prepay with little or norestrictions or fees. In this universe, loansare either first-lien or second-lien. As theirmonikers imply, first-lien loans have a senior claim on collateral, while second-lienloans have a junior claim.In general, loans range in size from 50million at the low end to upward of 10 billionon the high end. They are used for a varietyof purposes, most commonly for leveragedbuyouts, recapitalization, and refinancings.Most leveraged loans are structured andsyndicated to accommodate the two primarysyndicated lender constituencies: banks(domestic and foreign) and institutionalinvestors (mainly structured finance vehicles,mutual funds, and insurance companies). Assuch, leveraged loans consist of: Pro rata debt consists of the revolvingcredit and amortizing term loan (TLa),Standard & Poor’s which are packaged together and usuallysyndicated to banks. In some loans, however, institutional investors take pieces ofthe TLa and, less often, the revolvingcredit, as a way to secure a larger institutional term loan allocation. Why are thesetranches called “pro rata”? Becausearrangers historically syndicated revolvingcredit and TLa’s on a pro rata basis tobanks and finance companies. Institutional debt consists of term loansstructured specifically for institutionalinvestors, although there are also somebanks that buy institutional term loans.These tranches include first- and secondlien loans, as well as prefunded letters ofcredit. Traditionally, institutional trancheswere referred to as TLb’s because they werebullet payments and lined up behind TLa’s.The S&P/LSTA index consists largely ofinstitutional loans and is intended to illustratethe performance of these loans. Thus, most of thedata in this report surround the loan market’sinstitutional segment.The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 20073
Section 1:Loan Market OverviewAnalytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.comRobert PolenbergNew York(1) 212-438-2717robert polenberg@standardandpoors.comAs a result,institutional loansgrew to 41% of theoverall universe ofOver the past decade, a growing and vibrant base of nonbank investorshas transformed the leveraged loan market. At the end of 2006,their ranks had swelled to 254 accounts from just 40 10 years earlier. As aresult, these institutional loans accounts provided 74% of the capital backingleveraged loans, up from 33% in 1997. (Except where otherwise noted, alldata in this article is sourced from Standard & Poor’s LCD.)As nonbank investors have gone fromsupporting players to leading actors in theleveraged loan market, the market hasexpanded, deepened, and become moredriven by “technicals,” or simple supply anddemand dynamics. After all, where bankscan, in essence, manufacture credit, theseinvestors need to raise funds to put to work,and when supply overwhelms inflows thenthe market backs up; when the opposite is thecase the market goes into bull mode withspreads tightening and secondary prices risingIn recent years, structured finance vehicleshave been a large source of loan market liquidity. In 2006, the volume of collateralizedloan obligations (CLO) nearly doubled to arecord 97 billion from 53 billion in 2005,according to data from JP Morgan CDOresearch and Merrill Lynch structured financeresearch. Hedge funds have also been a bigliquidity source. These accounts boosted theirshare of the primary market for leveragedloans to 13% in 2006 from 8% in 2005.institutional andhigh-yield bonds,Market Sizethe end of 2004.Powered by strong demand, the pool ofoutstanding institutional loans grew to 400billion at the end of 2006 from 35 billion atyear-end 1997. As a result, institutional loansgrew to 41% of the overall universe of institutional and high-yield bonds, or 355 billionof 953 billion, from 28% a year earlier andfrom 25% at the end of 2004, according toloan data from Standard & Poor’s Leveraged4www.standardandpoors.comor 355 billion of 953 billion, from28% a year earlierand from 25% atCommentary & Data (LCD) and bond datafrom Merrill Lynch high-yield research.Arrangers expect loans to continue to dominate the leveraged finance landscape in 2007.Issuers—particularly on the private equityside—have embraced loans for a number ofobvious reasons: The prepayment option is a handychoice, for sure, in this age of rapid flipsand dividends; Covenants are becoming less and lessrestrictive, making them more appealing toleveraged issuers; The second-lien loan juggernaut allowsprivate issuers to layer in—and leverageup—their balance sheet while avoiding thetedious SEC disclosure process; and The amortizing term loan is becoming ananachronism, meaning issuers can go with aloan package and still largely avoid principalrepayments (just 6% of 2006’s LBO loanshad an A tranche, down from 8% in 2005and from 13% in 2004; in 2001, by contrast, 75% had an A loan).Therefore, loans appear likely to climb tonear parity with high-yield bonds in terms ofoutstanding debt by the end of 2007. In fact,if 2006’s new-issue volume and repaymentpatterns continue throughout 2007, loanswill end the year at 530 billion, or 47% ofthe overall total. By this logic, by 2009, loanswill achieve a majority position in the leveraged finance universe.
1997199819992000200120022003200420052006 Standard & Poor’s 2007.Number Of Issuers With OutstandingLeveraged LoansChart 3Dec. 2006Dec. 2005Dec. 2004Dec. 2003Dec. 2002Dec. 2001Dec. 20006005004003002001000Dec. 1999(Bil. )Dec. 1998(Bil. )5004003002001000Pro RataDec. 1996InstitutionalPar Amount Of Outstanding Leveraged LoansChart 2Dec. 1997U.S. Leveraged Loan VolumeChart 1Source: Standard & Poor’s LCD. Standard & Poor’s 2007.Chart 4Number Of Institutional Loan Investor Groups(No. of groups)(No. of issuers)Dec. 2006Dec. 2005Dec. 2004Dec. 2003Dec. 2002Dec. 2001Dec. 1999Dec. 20003002502003200420052006Q4 2006Q1 20062006Q2 20052005Q3 20042004Q4 20032003Q1 20032002Q2 20022001Q3 200120Source: Standard & Poor’s LCD and Merrill Lynch Global High-Yield Strategy. Standard & Poor’s 2007.Source: Standard & Poor’s LCD. Standard & Poor’s 2007.Chart 72002Q4 200040Q1 200060Q1 1997(Bil. )80604020020002001Institutional Volume As A % Of TotalHigh-Yield Finance VolumeQ2 1999Chart 68019992000Q3 1998Institutional Investors’ Share Of ThePrimary Market For Leveraged Loans(%)01999Source: Standard & Poor’s LCD. Standard & Poor’s 2007.Source: Standard & Poor’s LCD. Standard & Poor’s 2007.Chart 5200150100500Q4 1997Dec. 1998Dec. 19978006004002000Institutional Bank Debt As A % Of TotalOutstandings In The High-Yield MarketChart 8Leveraged Finance Market By Facility TypeAs of Dec. 31, 2006Senior secured high yield (5%)Second-lien bank debt (2%)Source: Standard & Poor’s LCD and MerrillLynch Global High-Yield Strategy. Standard & Poor’s 2007.Standard & Poor’s Jan. 2006July 2006Jan. 2005July 2005Jan. 2004July 2004Jan. 2003July 2003Jan. 2002July 2002Jan. 2001July 2001Jan. 2000July 2000Jan. 1999July 1999Jan. 1998July 1998Senior unsecured high-yield (43%)Jan. 1997July 1997(%)50403020100First-lien bank debt (39%)Subordinated debt (11%)Source: Standard & Poor’s LCD and Merrill Lynch Global High-Yield Strategy. Standard & Poor’s 2007.The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 20075
Section 2:S&P/LSTA Index DemographicsAnalytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.comRobert PolenbergNew York(1) 212-438-2717robert polenberg@standardandpoors.comThe following charts describe the demographic aspects of the index by sector and rating.Chart 1Outstanding Leveraged Loans By IndustryAs of Dec. 31, 2006; total par amount 399.7 billionOther (19%)Aerospace and defense (1%)(5%) Utilities(4%) Telecom(4%) Retailers (except food/drug)(5%) Publishing(4%) Oil and gas(4%) Leisure(2%) Hotels/motels/inns/casinos(9%) Health care(2%) Food products(2%) Financial intermediariesAutomotive (8%)Broadcast radio and television (2%)Building and development (5%)Business equipment and services (5%)Cable television (5%)Chemical/plastics (5%)Containers and glass products (2%)Electronics/electric (5%)Source: Standard & Poor’s LCD, S&P/LSTA Index. Standard & Poor’s 2007.Chart 2Outstanding Leveraged Loans By S&P Loan RatingAs of Dec. 31, 2006; total par amount 399.7 billion2520151050BBB-BB BBSource: Standard & Poor’s LCD. Standard & Poor’s 2007.6www.standardandpoors.comBB-B BB-CCC CCCCCC-DNR
'PS UIF CFTU TPVSDF PG OFXT DPNNFOUBSZ BOE EBUB PO UIF MFWFSBHFE MPBO NBSLFU DIFDL PVU 4UBOEBSE 1PPSµT -FWFSBHFE PNNFOUBSZ %BUB JOGPSNBUJPO BU www.LCDcomps.comNew York marc auerbach@standardandpoors.com 212.438.2703London anna cini@standardandpoors.com 44 02071763997www.standardandpoors.comThe opinions expressed in commentaries by Standard & Poor’s Leveraged Commentary & Data, a business unit of Standard & Poor’s that is separate and distinct from its ratingsoperation, are solely their own. These opinions and data are based on publicly available information from sources believed to be accurate and reliable. Standard & Poor’s LeveragedCommentary & Data does not have access to non-public information obtained by our credit rating analysts, who treat all non-public information provided by issuers during thecredit rating process as confidential. Standard & Poor’s credit rating analysts do not disclose this information to Leveraged Commentary & Data or to any other employees ordivisions of Standard & Poor’s. For more information, please call (212) 438-7205.
Section 3:Loan Market PerformanceAnalytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.comRobert PolenbergNew York(1) 212-438-2717robert polenberg@standardandpoors.comThe ranks ofinstitutional loaninvestors swelledto 254 at year-endIn general, the loan market lived up to expectations over the past decadeby generating a low alpha—but even lower beta—product. Thus, loansrewarded investors with superior risk-adjusted returns. The structured financemarket certainly took notice. CLO issuance nearly doubled in 2006 to 97 billion from the record 53 billion in 2005, according to JP MorganCDO research, Merrill Lynch Structured Finance research, and Standard &Poor’s CDO chief David Tesher.Indeed, despite some turbulent times for thecapital markets, especially in 2001 and 2002,the loan market has turned in 10 successiveyears of positive returns.Loans have performed like the financialmarket’s version of baseball great Wade Boggs,hitting for average, but not power, year afteryear. Indeed, returns from 1997 through 2006averaged 5.46%, ranging from a high of9.97% in 2003 to a low of 1.91% in 2002.Over this same period, the band for highyield returns was much wider, from a low ofnegative 5.1% in 2000 to a high of 28.15%in 2003. The S&P 500 was more ambitiousstill, with a range of negative 22% in 2002 to33% in 1997.Steady-but-unspectacular returns have beencompelling enough—especially when turnedup with leverage in the form of CLOs andcredit opportunity funds—to attract a largeand growing investor following. To wit: theranks of institutional loan investors swelledto 254 at year-end 2006 from just 40recorded 10 years earlier. As a result, theinstitutional loan asset class has grownmightily. At year-end 2006, outstanding institutional loans totaled 400 billion, up morethan 10-fold from 1997, when that universestood at 34 billion.2006 from just40 recorded‘BB’ Versus ‘B’ Loan Returns10 years earlier.Over the past 10 years, credit quality wasking in the loan market. ‘BB’ rated loans out-8www.standardandpoors.comperformed ‘B’ rated loans, with an averageannual return of 5.32%, versus 4.95%. Thislead was built up between 1997 and 2001.During that period, loans in the ‘BB’ categoryoutperformed those in the ‘B’ category eachyear, by an average of 5.73% to 2.94%.Since 2002, the tide has turned. ‘B’ loanshave outperformed for five successive years,6.96% versus 4.91%.That ‘B’ loans led the way over the pastfive years is understandable, what withdefault rates receding to record lows and themarket in a fully bullish mode. It is not surprising, either, that ‘BB’ loans outperformedin the more stressful years of the late 1990sand early 2000s. Looking ahead, ‘B’s mightbe better positioned to keep up with ‘BB’loans over the next cycle. The reason:investors have responded to better ‘BB’ performance by driving ‘BB’ spreads lower, relative to ‘B’ spreads. Since 1997, ‘BB’ loanspreads have averaged 55 bps inside that of‘B’ loans. Over the past year, the gap betweenthe two categories has widened 26 bps, to 81bps. This goes a long way toward closing the37 bps gap between the historical performance of ‘BB’ and ‘B’ Index loans.Where the ‘BB’s really hit the cover off theball was relative returns. The Sharpe ratio for‘BB’ loans between 1997 and 2006 was 0.97,compared with 0.40 for ‘B’ loans. Today’sincreased ‘BB’/’B’ spread gap seems woefullyinadequate to make ‘B’ loans a contender ona Sharpe ratio basis.
Leveraged Loan 22003200420052006Source: Standard & Poor’s LCD. Standard & Poor’s 2007.‘BB’ Leveraged Loan 00120022003200420052006‘CCC’ Leveraged Loan Returns2003200420052006200420052006‘B’ Leveraged Loan (5)(10)200220032004Defaulted Leveraged Loan ReturnsChart 2006Source: S&P/LSTA Index. Standard & Poor’s 2007.Source: S&P/LSTA Index. Standard & Poor’s 2007.Leveraged Loan Returns By Collateral PackageAll loans2002Source: S&P/LSTA Index. Standard & Poor’s 2007.(%)First-lien loansS&P/LSTA Index VolatilityChart 8Average 12-Month Lagging Standard Deviation Of ReturnsSecond-lien loans(%)S&P/LSTA index (%)1210864201.20.8Standard & Poor’sDec. 2006Dec. 2005June 2006Dec. 2004June 2005Dec. 2003June 2004Dec. 2002June 20032006Dec. 19982005June 19992004Source: S&P/LSTA Index. Standard & Poor’s 2007.Dec. 19970.0June 19980.4Dec. 2001Chart 72001June 2002Chart 52000Dec. 200019971999*Excludes defaulted loans.Source: S&P/LSTA Index. Standard & Poor’s 2007.Chart 4Source: S&P/LSTA Index. Standard & Poor’s 2007.1998June 2001Chart 31997Dec. 19991997Performing Leveraged Loan Returns*Chart 2June 2000Chart 1 Standard & Poor’s 2007. The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 20079
Section 4:Loan Market Versus OtherAsset ClassesAnalytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.comAs discussed in Section 3, the loan market over the past decade has generated relatively low alpha but even lower beta, resulting in superior risk-adjusted returns. Indeed, the S&P/LSTA Index racked up an average monthlyreturn of 0.44% over the past 10 years. This is the lowest of the five assetclasses that Standard & Poor’s normally tracks the Index against, lagging theS&P 500, which returned 0.77%, the Merrill Lynch High-Yield Master Index(0.56%), 10-year Treasuries (0.48%) and the Merrill Lynch Higrade MasterIndex—a measure of investment-grade bond returns (at 0.55%).On the other side of the risk/return equation, loans topped the list at a standarddeviation of monthly returns of 0.54%,compared with the S&P 500 at 4.43%,high-yield bonds at 2.08%, 10-yearTreasuries at 2.05%, and investment-gradebonds at 1.32%. As a result, then, loansproduced stellar risk-adjusted returns, with a10-year Sharpe ratio of 0.92 versus 0.39 forthe S&P 500, 0.44 for high-yield bonds,0.31 for 10-year Treasuries, and 0.67 forinvestment-grade bonds.Looking more broadly, there are threeasset classes among the 56 LCD surveyedthat generated a better risk-adjustedreturn than loans over the past 10 years:Australian Corporates at 1.10%, GlobalEmerging Markets Sovereign and Corporatedebt at 1.08%, and Mortgage Master Indexat 0.97%.CorrelationsLoans are idiosyncratic instruments—floatingrate, callable, and highly structured. For thisreason, while loans do broadly track theups and downs of the equity or high-yieldmarkets during periods of turbulence orebullience, they remain a largely uncorrelatedasset class, generally unaffected by interestrate movements and insulated to a largedegree from credit problems by collateral.10www.standardandpoors.comLoans produced stellarrisk-adjusted returns, with a10-year Sharpe ratio of 0.92versus 0.39 for the S&P 500,0.44 for high-yield bonds, 0.31 for10-year Treasuries, and 0.67 forinvestment-grade bonds.Therefore, even comparing loans with highyield bonds—despite an overlapping issuerpool—produces a correlation coefficient of0.60. This is the highest correlation of anybroad asset class.The correlation coefficient falls to 0.35,relative to speculative-grade convertiblebonds, 0.19 for the S&P 500, 0.18 forglobal emerging-markets debt, 0.03 forinvestment-grade bonds, negative 0.05 forthree-month T-bills, negative 0.21 formortgage-backed securities, and 0.23 for10-year Treasuries.
Chart 1Average Annualized Monthly Return Of The S&P/LSTA Index Vs. Other Asset ClassesJan. 1997 to Dec. 2006(%)121086420S&P/LSTIndex‘BB’Loan Index‘B’Loan IndexPerf.Loan IndexMerrill LynchHigh Yield10-yearTreasuriesS&P 500Merrill LynchHigradeCorporatesMerrill Lynch‘BB’ BondsMerrill Lynch‘B’ BondsSources: Standard & Poor’s; S&P/LSTA Index; Merrill Lynch; Bloomberg. Standard & Poor’s 2007.Chart 2Standard Deviation Of Monthly Returns Of The S&P/LSTA Index Vs. Other Asset ClassesJan. 1997 to Dec. ex‘BB’Loan Index‘B’Loan IndexPerf.Loan IndexMerrill LynchHigh Yield10-yearTreasuriesS&P 500Merrill LynchHigradeCorporatesMerrill Lynch‘BB’ BondsMerrill Lynch‘B’ BondsS&P 500Merrill LynchHigradeCorporatesMerrill Lynch‘BB’ BondsMerrill Lynch‘B’ BondsSources: Standard & Poor’s; S&P/LSTA Index; Merrill Lynch; Bloomberg. Standard & Poor’s 2007.Chart 3Sharpe Ratio* Of The S&P/LSTA Index Vs. Other Asset ClassesJan. 1997 to Dec. 20061.21.00.80.60.40.20.0S&P/LSTIndex‘BB’Loan Index‘B’Loan IndexPerf.Loan IndexMerrill LynchHigh Yield10-yearTreasuries*Defined as average annualized monthly return minus risk-free rate (three-month Treasuries) divided by annualized standard deviation of monthly returns (standard deviation multiplied by square root of 12).Sources: Standard & Poor’s; S&P/LSTA Index; Merrill Lynch; Bloomberg. Standard & Poor's 2007.Standard & Poor’s The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 200711
Loan Market Versus Other Asset ClassesSecurity Market LineChart 4Annual return (%)16 Global Emg Mkts14 Sovereign and Corp. 12 10ML US High Yield Cash Pay Russell 2000 08 ML Highgrade Corp. ML High Yield 06 ML 10-yr Treasury 04 S&P/LSTALeveraged Loan 023-mo US Treasury Bill000.05.0 10.0 NASDAQComposite S & P 50015.0 Altman Defaulted Bond20.025.030.035.0Annual standard deviation (%) Standard & Poor’s 2007.Table 1Correlation Of The S&P/LSTA Leveraged Loan Index With Other Asset ClassesAsset class12RatioAsset classRatioU.S. High Yield Small Caps0.68All Convertibles (Exclude Mandatory Spec Quality)0.35U.S. High Yield Cash Pay CCC/CC/C0.66HDAX Index (Frankfurt)0.31U.S. High Yield CCC/CC/C0.65All Convertibles (Exclude Mandatory All Qualities)0.31U.S. High Yield Distressed0.65SBF-250 (Paris)0.29US High Yield Cash Pay0.60FTSE 350 (London)0.23U.S. High Yield Master II Construction0.59S&P 5000.19High Yield0.59Global Emerging Market Sovereign and Corporates0.18U.S. Original Issue High Yield0.58NASDAQ Composite0.17U.S. High Yield Large Caps0.58US Emerging Market Sovereign Plus0.16U.S. High Yield Cash Pay BB-B0.57U.S. Corporates 'BBB'0.12U.S. High Yield Cash Pay B0.55EMU Corporates Nonfinancial0.06Sterling High Yield0.54Higrade Corporates0.03U.S. High Yield Cash Pay BB0.53EMU Corporates(0.02)U.S. High Yield B0.53U.S. Corporates 'A'(0.05)U.S. High Yield BB0.523-month U.S. Treasury(0.05)U.S. High Yield 100 Index0.52U.S. Treasuries Inflation-adjusted(0.10)U.S. Fallen Angel High Yield0.51Australian Corporates(0.11)Canada High Yield0.49Japan Extended Corporates(0.11)U.S. High Yield Nondistressed0.49U.S. Corporates 'AAA'(0.12)European Currency High Yield 30.49U.S. Corporates 'AA'(0.12)European Currency High Yield0.47U.K. Gilts 7-10 year(0.14)Altman Defaulted Bond0.46German Federal Govts 7-10 year(0.15)Global High Yield European Issuers0.46Mortgage Master(0.21)Euro High Yield 3% Constrained0.44US Treasuries 10-year(0.23)Euro High Yield0.42US Treasuries 7-10 year(0.25)Moody's Bankrupt Bond0.37US Treasury Current 5 year(0.28)Russell 20000.36US Treasury Current 3 year(0.29)www.standardandpoors.com
Table 2Security Market Line DataAnnualized standarddeviationAnnualizedreturn (%)Annualized standarddeviationAnnualizedreturn (%)S&P/LSTA Leveraged Loan1.95.5US Emerging Market Sovereign Plus14.212.5High Yield7.26.9Altman Defaulted Bond16.15.97.15.9Canada High Yield7.36.415.49.7Global High Yield European Issuers11.24.510-year TreasuriesS&P 500Higrade Corporates4.66.8European Currency High Yield11.25.3U.S. High Yield Cash Pay6.77.1Sterling High Yield10.27.7Mortgage Master2.66.3Euro High Yield12.44.63-month U.S. Treasury0.53.8Japan Extended Corp2.32.1Russell 200020.111.7Australian Corporates2.96.9NASDAQ Composite28.711.5EMU Corporates Nonfinancial2.85.3Moody's Bankrupt Bond244.9EMU Corporates2.75.5German Federal Govts. 7-10 year4.36.1HDAX Index (Frankfurt)23.411.8U.K. Gilts 7-10 year4.56.8SBF-250 (Paris)19.314.3FTSE 350 (London)13.99.6U.S. Treasuries Inflation-Adjusted56.8U.S. Corporates 'AAA'4.56.8All Converts (Exclude Mandatory Spec Quality)16.110.6U.S. Corporates 'AA'4.26.7All Converts (Exclude Mandatory All Qualities)13.19.6U.S. Corporates 'A'4.66.8U.S. Treasury Current 3 year2.75.4U.S. Corporates 'BBB'4.96.6U.S. Treasury Current 5 year4.55.5U.S. High Yield Cash Pay 'BB'5.77.3U.S. Treasury 7-10 year5.96.5U.S. High Yield Cash Pay 'B'7.36.7U.S. High Yield 'BB'5.77.3U.S. High Yield Cash Pay CCC/CC/C11.46.4U.S. High Yield 'B'7.96.3U.S. High Yield Cash Pay BB/B6.36.9US High Yield CCC/CC/C12.27.1U.S. High Yield Small Caps6.27.5US High Yield 100 Index7.87.2U.S. High Yield Large Caps7.76.7US High Yield Master II Construction76.9U.S. High Yield Distressed20.40.5European Currency High Yield 311.25.25.47.5Euro High Yield 3% Constrained12.44810.8Global Emerging Market Sovereign and Corporate10.114.77.16U.S. High Yield NondistressedU.S. Fallen Angel High YieldU.S. Original Issue High YieldStandard & Poor’s The S&P/LSTA Loan Index: A 10-Year RetrospectiveApril 200713
Appendix:S&P/LSTA Leveraged Loan IndexAnalytical Contacts:Steven C. MillerNew York(1) 212-438-2715steven miller@standardandpoors.com14The S&P/LSTA Leveraged Loan Index (LLI) reflects themarket-weighted performance of U.S. dollar-denominated institutionalleveraged loan portfolios. The LLI is the only U.S. leveraged loan index thatuses real-time market weightings, spreads, and interest payments.The LLI was calculated monthly from Jan. 1,1997 to Jan. 1, 1999, and is now calculatedweekly. There are five subindexes publishedweekly in addition to the base index: ‘BB’ Index—Facilities with a rating of ‘BB ’to ‘BB-’ from Standard & Poor’s; ‘B’ Index—Facilities with a rating of ‘B ’ to‘B-’ from Standard & Poor’s; Original-Issue ‘BB’ Index—Facilities with aninitial rating of ‘BB ’ to ‘BB-’ fromStandard & Poor’s; Original-Issue ‘B’ Index—Facilities with aninitial rating of ‘B ’ to ‘B-’ from Standard &Poor’s; and Performing Loan Index—All loans excludingthose in payment default.Criteria For Inclusion And DeletionData Sourcing And ManagementPerformance Calculation FormulasThe LLI is unique in that it uses real-time market weightings and spreads for the facilitiesconstituting the index. This data is sourcedfrom current investors in these credits.The index uses the Average Bid fromLSTA/LPC Mark-to-Market Pricing for itsmarket value return calculations. In addition,S&P/LCD’s comprehensive and detailed database of credits supports the index, allowingfor the provision of an array of detailedanalysis and comparables. JPMorgan FCS’sWall Street Office is the data platform.S&P’s Index Services group, which supports all of S&P’s indexes, created a calculation platform specifically tailored to thenuances of the syndicated loan market. TheLLI calculation platform runs according tothe rigorous standards and methodologiesapplied to all of Standard & Poor’s indexes.The LLI and its subindexes are all marketweighted. The return for each index is thecomposite of each component facility’s returntimes the market value outstanding from theprior time period:www.standardandpoors.comFacilities are eligible for inclusion in theindex if they are U.S. dollar-denominatedterm loans from syndicated credits and meetthe following criteria at issuance: Minimum initial term of one year, Minimum initial spread of LIBOR 125, and Minimum initial size of 50 million.The index primarily consists of seniorsecured facilities. However, it does includesecond-lien and unsecured loans if they arebroadly held by CLOs and other traditionalloan accounts.Loans are retired when there is no bidposted on the facility for at least 12 successive weeks or when the loan is repaid.nIndex Return Σ {TRFi,t x (pi,t-1 X OSi,t-1)}i 1n—Number of component facilities in the indexTRFi,t—Total return for component facilitypi,t -1—Price in prior time period (t-1)OSi,t-1—Current outstanding for component facility
The total return for each facility reflectsboth market value change and interestaccrued, as well as an adjustment for anyrepayments made during the calculationperiod because repayments are assumed to bemade at par. (See formula below.)Interest is calculated on a 30/360 basis.It accrues daily, compounds quarterly, andpays in cash in real-time with the interestpayment exiting the portfolio at the timeof payment. TRFi,t (((pi,t AIi,t) x OSi,t ((100 - pi,t) x (OSi,t-1 – OSi,t)))((pi,t-1 AIi,t-1) x OSi,t-1)pi,t-1—Price in prior time period (t-1)AIi,t—Accrued income (base LIBOR plus spread overLIBOR) in current time period (t)AIi,t-1—Accrued income (base LIBOR plus spread overLIBOR) in prior time period (t-1)OSi,t-1—Dollars outstanding in prior time period (t-1)Index ContactsStandard & Poor’s/LCD (www.lcdcomps.com):LSTA (www.lsta.org):Steven Miller(212) 438-2715steven miller@standardandpoors.comAllison Taylor(646) 637-9176ataylor@lsta.orgRobert Polenberg(212) 438-2717robert polenberg@standardandpoors.comJ.P. Morgan FCS (www.fcsoft.com):Matthew Sanderson(212) 438-2720matthew sanderson@standardandpoors.comStandard & Poor’s The S&P/LSTA Loan Index: A 10-Year RetrospectiveMark Murray(972) 560-4420mmurray@fcsoft.comApril 200715
Key ContactsBank Loan & Recovery RatingsNew YorkMarketing and Syndication LiaisonSteven BavariaVice President, Head of Loan & Recovery Ratings
Standard & Poor’s The S&P/LSTA Loan Index: A10-Year Retrospective April 2007 3 The S&P/LSTA Loan Index 1997–2006 W hen Standard & Poor’s Ratings Services and the Loan Syndications & Trading Association rolled out the S&P/LSTA leveraged loan index in 2000, it was back-loa
6. Loan geography 8. 7. Contractual cash flows for each loan or pool of loans Risk System Data: 1. Loan classes and grades 2. Modification history by loan class 3. Loan renewal and funding history by loan class 4. Loan prepayments history by loan class 5. Loan cash flows not collected 6. Loan grade LGD and PD rates 7. Loan grade charge-off history
Dec 19, 2019 · Source: LCD, an offering of S&P Global Market Intelligence S&P/LSTA Leveraged Loan Index page 27 The S&P/LSTA Leveraged Loan Index returned 0.57% for the week ended Dec. 18, bringing year-to-date loan returns to 8.30%, up from 1.40% during the same period in 2018. BB loans re
global leveraged loan market is as high as USD 3.2tn (EUR 2.9tn)5, which is still more than the USD 1.5tn (EUR 1.4tn) quoted by market analysts. . Association (LSTA) Loan Index, the reference index for US leveraged loans, has moved around 2% whereas the S&P European Leveraged Loan Index (ELLI) stayed at 0% for several months during .
last loan of a loan sequence. For more than 80% of the loan sequences that last for more than one loan, the last loan is the same size as or larger than the first loan in the sequence. Loan size is more likely to go up in longer loan sequences, and prin
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Loan Estimate and Closing Disclosure Time Chart 1 TILA RESPA Time Chart 3 Loan Estimate Rounding Chart 5 Closing Disclosure Rounding Chart 9. LOAN ESTIMATE . CFR Reference Loan Estimate Disclosure Annotated 15 H-24(A) Mortgage Loan Transaction Loan Estimate 19 H-24(B) Fixed Rate Loan 31 H-24(C) Interest Only Adjustable Rate Loan 35 H-24(D .
Community Banks( 3B) vs. Regionals( 20B- 100B) Loan Yields vs. Market Rates Attendee Submitted Loan Pricing Case Studies Community Bank ROE and Loan ROE Trends Loan Pricing in a Rising Rate Environment . 5 TRENDS 6.44 5.09 5.11 4.75 5.25 5.75 6.25 6.75 Loan Yields Community Bank Loan Yields Regional Bank Loan Yields
from Artificial Intelligence Eliezer Yudkowsky, Anna Salamon Machine Intelligence Research Institute Carl Shulman, Steven Kaas, Tom McCabe MIRI Visiting Fellows Rolf Nelson Abstract In 1965, I. J. Good proposed that machines would one day be smart enough to make themselves smarter. Having made themselves smarter, they would spot still further opportunities for improvement, quickly leaving .
