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Capital Markets Update – Week of May 15, 2020 (audio)

In an effort to provide even greater transparency around our offerings and our investment platform, Prath Reddy and the capital markets team provide weekly updates.

Listen below for Prath’s most recent views on our short-term note program and the current private credit landscape from Percent’s perspective.

Please find the transcript for this video below.


Hey everyone. This is Prath Reddy, Head of Capital Markets here at Percent.

Thank you for tuning in to this week’s STNP market update for the week ending May 15th, 2020, where we provide news and insights that are relevant to our short-term note program market. Briefly zooming out on the equity markets this week, U.S. stocks trended lower and are opening up this Friday mostly in the red, as it looks like the market is finally beginning to realize a V-shaped recovery is most likely not in the cards.

Retail sales and manufacturing data came in worse than estimates, and then we have some renewed trade concerns throwing fuel on the fire to most likely end the week with single-digit type percentage declines across all the major indices. Flipping over into the fixed income markets, treasuries did rally in tandem with equities giving back some recent gains this week. So a slight flight to quality bid here and the 10-year is now hovering just north of 0.6%. Both IG and high yield spreads are relatively flat week over week, effectively putting an end to a massive rally we’ve seen take place across the board since year to date wides hit on March 23rd.

And on the primary side, it continued to be an active week as investment grade high yield and ABS issuers continue to rush into this market and take advantage of low benchmark rates and the overall constructive quote-unquote risk-on window while it lasts. 

Now, taking a look at the STNP Market specifically, we had just over $2 million pricing across three separate offerings this week, which brings our year to date total to roughly $57 million and helped us cross the $100 million total issuance since inception mark, which all of us here at Percent are of course extremely proud of. And it wouldn’t be possible without all of our fantastic investors and origination partners, so a big thank you to everyone in helping us achieve this incredible milestone.

Taking a look at the week specifically in terms of flows, we did see an uptick in outflows to the tune of a few hundred thousand dollars. But this was really due to a few downsizes that we saw in two of our offerings this week and investors kind of pulling cash from those deals. We are working towards providing FDIC insured interest-bearing accounts to allow investors to park cash in between offerings and we’ll have some more updates around this in the coming months.

Looking at each deal specifically the first to close this past week was Pollen on Saturday, which was a rollover call, refinancing offering of a million dollars in a 3 month structure. Notably on this trade, we saw a significant interest during our Dutch auction and ultimately launched the deal a hundred basis points tighter than the prior note, which was then met with outsized demand well in excess of a million dollars when we actually went out and announced it. Which led us to close the order book after just two days of going out with the trade, so very strong demand here.

And then the next offering was a 50,000 dollar trade with Axle. This was a downsize from the prior $300,000 deal because Axle recently raised equity and did not have as large of a need for subordinated capital at this time. This dynamic will change over time, but in an effort to temporarily reduce negative carry, we opted to downsize the program for now. That being said, this one also saw a very large over subscription across the range during the Dutch auction, which led us to launch the deal of full 200 basis points inside of the prior. And the offering was fully subscribed within roughly 20 minutes of launching it by existing investors.

And then last but not least, we closed an 11.5%, $975,000 rollover offering for ThunderRoad in a three-month bullet. This offering was slightly downsized from the prior $1.125 million dollar offering, and we’ll be planning to introduce some structural changes in terms of note format for next month’s rollover with ThunderRoad to work towards what standardizing our note structures across the board as I mentioned during last week’s market update. 

Outside of these three that priced, we did launch an upside offering for SALT Lending which effectively was fully subscribed within just a few hours. And we launched it at auction for Pollen, Northwest Capital and Zinobe on Wednesday, which are all slated to launch and become available for investment over the coming few days and close by the end of this month.

So all in all, a very active week here in the STNP market, and it’s been great to see a resurgence of demand for both retail and institutional investors.

On the reporting front, we’ll be releasing a new weekly performance report for Aspiria in the coming days – to make it our fourth program providing detailed insights into the performance of the underlying collateral supporting our notes with many, many more in the works.

That’s all I have for this week. But thanks for listening in and hope you tune in again next week. Take care and be well.

Nothing in this video should be construed as an offer to sell securities or a solicitation of an offer to buy securities. All investment involves risk and the possibility of loss, including loss of principal, and neither past performance nor forward looking information is a guarantee of future results.

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