Some investors are less than enthusiastic about the swathe of new deals coming to market. Complaints range from poor structures to bad credit profiles, leading to the expectation those names will be inactive on the break. In the meantime, some see good opportunities in existing credits that have traded down as investors sell to make room for new issue.
One investor predicted the new credits will continue to break at par and trade at that level or slightly below. "They will trade around par or where they are issued," said one trader. "We will not see a whole lot of appreciation on the break. The deals are so big that everyone will be committed. Supply will outstrip demand. The days are gone when you can sell at 101."
Investors expect that the large deals, in particular, will not trade actively. "If you have a billion dollar deal everyone is going to get good allocations so it won't trade much," he said. Another investor said there are plenty of collateralized loan obligations that need assets and so will hang onto their allocations rather than sell in the secondary.
Jamey Grafing, senior v.p. in syndicated finance at FCS Commercial Finance Group, said that because of the large new issuance pipeline, he is seeing a lot of good buying opportunities in the secondary market. Also, because some investors are selling existing positions to make room for new issue, credits are trading down, also offering good buying opportunities. One credit he pointed to was SUPERVALU. "We see opportunities in the primary, but more opportunities in the secondary. We are being more aggressive in the secondary." At press time, SUPERVALU's term loan "B" was trading at 99.931-100.222, according to Markit.