Bank Loan Market Overview

Introduction

Risk / Return Profile

Pricing & Covenants

Historical Returns & Size

Recent Transactions

In this zero-rate environment, it’s difficult to find an investment avenue which provides adequate yield while, at the same time, does not expose your capital to substantial levels of risk and volatility.  Syndicated bank loans fulfill the role of a yield solution more than any other asset class in the market.  Some of the key factors of syndicated bank loans are as follows:

  • All-in-spread of 4-7%
  • Floating-rate interest; virtually zero interest-rate risk
  • Senior secured; first-lien claim on borrower’s assets
  • Relatively low volatility
  • Pre-payable; shorter duration
  • Generally strict covenants provide for additional security
  • Approximately $1.2 trillion market provides ample liquidity
  • Generally low default rate (1%-3%)
  • Recovery rates are higher than most forms of debt (60%-100%)
  • Rated by major rating agencies (Moody’s, S&P, etc.)