Up-front fees on pro rata tranches increased to 4.3 basis points, just edging out last year's annual high of 4.2 basis points for every one million dollars committed in October and November. According to Portfolio Management Data, fees on institutional pieces remained consistent at 2.4 basis points, ticking up just enough to beat 2.3 basis points in December 2000.
Marc Auerbach, associate at PMD in New York, said volume is just beginning to pick up. "But it's easy to pick up after a slow December," he remarked. Pro rata fees are higher than they have been since January 2000 and Auerbach attributes this to a tough pro rata market and consolidation in the banking sector. However, he distinguished the institutional side as waiting for the right deal with the right credit.
Auerbach said up-front fee levels are primarily still being driven by smaller deals [deals under $250 million] and many of those are originating out of the media/telecom sector. But Auerbach expects change to come, as what he considers to be an active pipeline should pump some volume into the leveraged loan market. During the first week of February, PMD tracked a volume of roughly $6.9 billion, compared to $5.8 billion the week prior and institutional issuance was up slightly at roughly $1.79 billion compared to $1.77 billion the week before. Auerbach expects transaction volume to continue to grow.
Auerbach would not comment on whether or not the recent rally in the high-yield bond market has affected fee levels.
