Loan Note: Bond issuance to match record 2020; Debt investors go green

Global bond issuance is experiencing a strong year and could match 2020s record figures. Also, headline rates for US property rise and new survey reveals speed of ESG adoption in debt. Here's today's brief for our valued subscribers only.

They said it

“The pressures caused by supply chains and energy prices will take months to ease. It would be irresponsible for anyone to pretend that we can solve this overnight.”

UK Chancellor Rishi Sunak comments on rising levels of inflation in his 2021 Budget announcement.

First look

Global bond issuance set to match record 2020 levels
Global bond issuance is likely to match 2020 levels by the end of the year, according to new research from S&P.

After record levels of issuance in 2020, S&P forecasts overall bond issuance in 2021 will be down just 0.2 percent. Through to the end of September, global bond issuance was $6.7 trillion, down 1.2 percent with the previous year, but the fourth quarter is expected to close the gap.

However, S&P believes bond issuance will start to fall off next year, forecasting a 2 percent fall in 2022.

Headwinds likely to affect bond markets next year include inflation, which has risen to its highest levels in more than a decade. The US Consumer Price Index showed 5.4 percent growth in September 2021 due to ongoing supply chain issues creating bottlenecks.

While S&P economists believe current inflationary trends to be transitory, it notes that a growing proportion of market participants are concerned about the potential for persistent inflation. While inflation concerns have not initially created problems for issuers, higher inflation is pushing real interest rates below zero in the US and even in Europe for European speculative grade credits.

US property price headline rates accelerate
Headline rates in US property prices continued to rise in September, according to a Real Capital Analytics report.

The RCA CPPI National All-Property Index, which measures commercial real estate price movements using repeat-sales regression methodology, climbed 16.1 percent since September 2020 and 2.2 percent since August, according to the report.

All four major property types, which includes apartment, industrial, office and retail, grew since last month, the research firm said. In addition, the industrial and apartment sectors each set a record for year-on-year price growth, with industrial rising 16.9 percent and apartments up 16.3 percent.

Deal volume of apartments totalled $178.5 billion through the first three quarters of this year, a near-record level of activity for a full year, according to the report. Office also surged 16.9 percent from the year ago month, driven by strong suburban office price growth of 20.2 percent.

The retail index rose 12.4 percent since last year – the second consecutive month of double-digit price growth. The six major metros saw an increase in price as well, growing 13.2 year-on-year, extending a rally that began late last year, RCA said.

Real Capital Analytics is a research firm focused on the deals, players and trends that drive the commercial real estate investment markets.

Essentials

Debt investors go green
A survey by the European Leveraged Finance Association ahead of the UN’s COP26 climate change conference found 100 percent of high yield and leveraged loan investors state ESG has increased in importance in the past 12 months. More than nine in 10 say climate risk assessment is an important element of credit analysis with 63 percent of those saying it is very important to their analysis.

The survey also found 78 percent of asset managers focused on high-yield and leveraged loans say requests from investors for portfolio-level climate change data has increased in the past two years, while none cited a decrease in requests.

Nine in 10 private debt investors surveyed state that a lack of ESG information could be a deal breaker for them when deciding investment opportunities, while 86 percent regularly monitor specific ESG metrics.

Pollen Street backs e-commerce investor
Specialist financial services lender Pollen Street Capital has provided an £80 million ($110 million; €95 million) senior credit facility to e-commerce investor Clearco.

The investment will support Clearco to provide fast equity-free capital to UK e-commerce businesses to accelerate uptake of Clearco services in the UK, the company’s second largest market outside the US.

Clearco was established in 2015 and has provided more than £1.4 billion of capital to over 5,500 small and medium-sized businesses.

LP watch

Institution: New Mexico State Investment Council
Headquarters: Santa Fe, US
AUM:
 $34.5 billion
Allocation to alternatives: 18.34%

New Mexico State Investment Council has approved a $75 million commitment to Sixth Street Growth Partners II, a contact at the sovereign wealth fund confirmed to Private Debt Investor.

The fund, managed by Sixth Street, was launched this month and is seeking to raise $3.5 billion.


Today’s letter was prepared by Andy Thomson with John BakieRobin Blumenthal and Michael Haley.

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