Every month, the capital markets team puts together an update that takes a look back at the previous month’s dealflow, while also highlighting the upcoming deal pipeline.
Please find Percent’s Short Term Note Program (STNP) monthly market update for December 2020 below.
Market Commentary
Following a contentious U.S. election that played into the first week of November, the market reacted positively to the results of Democratic representative Joe Biden winning the U.S. Presidency. Looking into the equity markets, the DOW Jones rose 11.8% in November, which marks its best monthly performance since January 1987. Furthermore, the S&P 500 and the NASDAQ also had significant monthly increases, posting 10.8% and 11.8% gains, respectively, marking their biggest monthly advances since April this year. The market gains for the month of November came even as the number of COVID-19 cases continued to rise to record-highs in the U.S. and globally, as encouraging vaccine news brought confidence for a smooth post-vaccine economic rebound into next year and beyond. Notwithstanding the above, the last trading session for the month marked losses on the back of statements from Federal Reserve Chairman Jerome Powell on the outlook for the United States economy still as “extraordinarily uncertain”. Powell also reinforced the Fed’s stance on continuing to use its policies to help lift the economic impacts that were onset by the pandemic. In addition, Treasury Secretary Steve Mnuchin had stated mid-way through November that he was granting a 90-day extension for only a few economic support programs that had been implemented in March, and would not be granting extensions for five other lending programs which included the corporate debt buying program, among others. As volatility was generally subdued this month, we saw the VIX index decrease from 37.1 points at month open to 20.6 points for month close. On the fixed income side we also saw little variability in the 5yr and 10yr benchmarks ending November at 0.36% and 0.84%, logging a 2bps and 4bps decrease, respectively, since October close.
The STNP market continued to expand during the month of November. As of December 1st, a total of $38.0mm of notes were outstanding following $17.7mm in issuance against $14.5mm in note amortizations or repayments during November. The current volume outstanding at month end sets a new record for the STNP Percent platform.
- Our STNP issuance since inception stands at $198.8mm, compared to $181.1mm at the time of last month’s update. Issuance has spanned 156 individual structured note offerings from 15 borrowers.
- STNPs issued in November had a weighted average APY of ~11.7% (with no fees to investors) with average tenors hovering a little below the 150 days mark. This compares to a new issue weighted average APY for October of ~12.4%.Â
- Percent has officially returned over $3.9mm in aggregate interest payments since inception to our growing investor base.
- With $2.8mm still in workout following missed payments, this represents a 1.42% default rate on issuance since inception.
November Capital Markets Activity
In the month of November, we continued to focus our attention on analyzing and monitoring underlying asset performance for all our borrower partners. We are now publishing periodic surveillance reports for thirteen borrowers on the Percent platform and expect to have a few more available by the end of December. You can find more information on how to best navigate these reports in one of our latest insights articles titled Delivering on Transparency with our Latest Surveillance Reports.Â
We successfully priced 12 offerings across our STNPs to land at $17.7mm, bringing our YTD 2020 total to $155.2mm.
- We were able to meet or increase target transaction sizes in 11 out of the 12 transactions issued this month. Pending market conditions, we are planning to announce a partnership with two new borrower partners by the end of December or early January that will provide new opportunities for investment.
- Offerings ranged widely in terms of tenor and size, from a 3-month senior issuance of $750,000 with ZayZoon pricing at 11.50% to a $4.4 million subordinate 3-month note with Northwest Capital pricing at 12.50%.
- We announced a new strategic partnership and closed our first transaction with a new borrower, The Smarter Merchant.Â
- The Smarter Merchant is a leading technology and data driven platform for short term funding to small and medium sized merchants seeking cash flow to meet operational and working capital needs. Founded in 2013, The Smarter Merchant has originated $40MM in the last 18 months alone, with sustained growth expected in 2021 and beyond. For the inaugural note on our platform, we reached the target goal of $1.5mm with a 15.75% APY, for a 9-month amortizing note.Â
Please see below our 1-month projected and 2-month historical issuance calendars along with a few charts highlighting STNP market activity since inception for further insight.
Projected Issuance
Historical Issuance
STNP Market Activity
Should you have any questions or would like to learn more about Percent, our issuances or the STNP market, please do not hesitate to reach out to us.
Nothing in this post 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. Any decision to invest must be based solely upon the information set forth in the offering documents, regardless of any information that may have been otherwise furnished, including in this update.