Institutional Fees Dip; Pro Rata Spikes Up
Up-front fees for institutional tranches inched down again to an average of 2.8 basis points per one million dollars committed last month, while pro rata tranches crept up from 3.8 basis points in July to 4.0 basis points in August for a rolling three-month period. According to Portfolio Management Data, fees on pro rata tranches for the three-month period ending August 2000 were an average 2.8 basis points on institutional tranches and 3.3 basis points on pro rata tranches for the same period.
Marc Auerbach, associate at PMD, explained that the story driving the continued decline in institutional fees and increase in pro rata fees has not really changed. "It's the same thing that we've seen so far this year. There's not enough institutional paper and it's a difficult pro rata market," said Auerbach, explaining that investors in term loans are still actively seeking institutional paper, driving down up front fees on the tranches while banks have had to entice retailers into pro rata tranches with an increase in up front fees.