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Capital Markets Update – Week of July 31, 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.


Hey everyone. This is Prath Reddy, head of capital markets here at Percent and thank you for tuning in to this week’s STNP market update for the week ending July 31st, 2020, where we provide news and insights that are relevant to our short-term note program market. Taking a quick peek at the broader equity markets this week – it was a relatively benign one up until yesterday given ongoing Q2 earning releases and most eyes glued to the coronavirus resurgence and all the uncertainty around what it may mean for both going forward, but it’s all led to a reality shock on Thursday when Q2 US GDP numbers posted the worst decline on record and jobless claims continue to take back up. The tough data here still wasn’t enough to prevent a decent rally though through yesterday’s close to bring the indices back to your side of flat in the week as I sit here on Friday morning. 

On the fixed income side: given the historically weak economic data releases, the 10-year extended rally that began on Tuesday this week dropping about 10 basis points to hover right around 0.53% right now, as such risk markets particularly investments creates a relatively light week with only around $25 billion pricing, despite a number of companies having already released earnings in what’s typically a period of much higher volume .The high-yield market also saw about five billion print this week. So, you know, I think all in all, it does seem the issuance spree earlier this year really was a pull forward of typical funding plans as you would think that spreads having largely tightened back towards where they were pre-COVID would entice more issuance, at this stage. 

The ABS Market was also relatively light, mostly comprised of CLOs and mortgage-backed deals, but notably Tesla tapped the market and we did see one esoteric offering from one of the leading consumer point of sale financing originators firm, which ended up pricing through $368 million across A, B, and C tranches coming with coupons ranging from roughly two percent to six and a quarter percent.

Taking a look at the STNP market now, it was a relatively light one on our end as well on the issuance front with just one deal pricing for a total of roughly one and a quarter million. This brings our July month to date total to a modest $7.1 million year to date almost $87 million and since inception to just north of $130M.

In terms of technicals, we did see another week of decent positive inflows to the tune of roughly a half a million or so as we had several deals launched late last week into early this week that were ultimately made available to non rollover investors. We didn’t have much in the way of maturities giving way to any substantial redemptions so hence the stable number here. And in terms of overall demand we are continuing to see healthy appetite across the board as witness in our Dutch auction this past week as well as how quickly those deals making their way through syndication or filling up – currently still active deals to be closed with Cherry and Aspiria are already fully subscribed and the current $4M offering with Wall Street Funding has less than $800K or so available, which subsequents next Saturday. 

New issuance concessions continue to be flat or slightly negative as well, I think signaling a market that is certainly constructive for originators and great for investors seeking more supply. Taking a look at the one deal that did price this week 9-I with Zinobe closed on Wednesday, which was a $1.24M, 2-month note that priced at 14% down from the most recent offering at 15%, so a negative 100 basis point new issuance concession here. This note supported by Zinobe’s very well diversified portfolio of consumer loans in Colombia is the result of consolidating two consecutive two month bullets that had been outstanding since December last year into one 2-month callable note that’s callable monthly as we continue to make strides in somewhat simplifying these STNPs for the benefit of both originators and investors alike.

Outside of this one note close, we did have a pretty busy week on the Dutch auction front with four offerings being announced and set to the launch imminently.  Upcoming rolls for ThunderRoad, Pollen and Axle were all made available and met with strong demand alongside our latest inaugural note for our newest originator, ZayZoon. We’re very excited to work with the team at ZayZoon, and you can learn more about them and their unique earned wage access product and their commitment to workplace financial wellness via our announcement, as well as the original profile page accessible from the Percent homepage.

And finally looking ahead to August. We are expecting a very busy month with respect to issuance. We also have at least one more new originator coming online as well as several new offerings from existing originators and much more on the surveillance and reporting front. On the technology side, our team is hard at work aiming to roll out several releases to our retail platform to make investing in STNPs, tracking cash flows and managing portfolios much more intuitive. So please stay tuned for these highly anticipated updates. As you know, we are very much just as excited as you are for those upgrades.  And that’s it from us this week, but thanks for tuning in and we look forward to catching up with you again next week.

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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