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S&P expands fixed income index family with launch of leveraged loan index

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Standard & Poor’s has announced the launch of the S&P/LSTA U.S. Leveraged Loan 100 Index, the second fixed-income index to be launched this month by the index provider.

Standard & Poor’s has announced the launch of the S&P/LSTA U.S. Leveraged Loan 100 Index, the second fixed-income index to be launched this month by the index provider. A market value-weighted index designed to measure the performance of the US leveraged loan market, it had a total market value of USD210bn at the end of September.

The U.S. Leveraged Loan 100 Index is designed to reflect the total return performance of the largest facilities in the leveraged loan market. It mirrors the market-weighted performance of the largest institutional leveraged loans based upon market weightings, spreads and interest payments.

The leveraged loan market consists of loans made to speculative-grade borrowers. The vast majority of loans are senior secured floating-rate paper that the issuer can prepay with little or no restrictions or fees. In this universe, loans are either first-lien or second-lien. As their name implies, first-lien loans have a senior claim on collateral, while second-lien loans have a junior claim. In general, loans range in size from USD50m to more than USD10bn.

The index consists of 100 loan facilities drawn from a broad market leveraged loan indicator, the S&P/LSTA (Loan Syndications and Trading Association) Leveraged Loan Index, which covers more than 1,100 facilities with an aggregate market value exceeding USD480bn.

‘Building on its family of fixed income indices, Standard & Poor’s now offers the market important perspectives on how the largest and more significant leveraged loans are performing as tracked by the S&P/LSTA Leveraged Loan 100 Index,’ says James Rieger, vice-president for fixed-income indices.

‘Along with LSTA, Standard & Poor’s is bringing greater transparency into how the loan market is performing by publishing key data elements such as total return, weighted average price of the facilities, total outstanding amount and total market value.’

‘Now, as much as ever, the market needs transparency,’ says Bram Smith, interim executive director of the LSTA. ‘The S&P/LSTA U.S. Leveraged Loan 100 Index provides investors with a highly useful tool in assessing current prices in the marketplace.’

The constituents of the U.S. Leveraged Loan 100 Index are drawn from a universe of syndicated leveraged loans representing ,ore than 90 per cent of the leveraged loan market. All syndicated leveraged loans covered by the S&P/LSTA Leveraged Loan Index universe are eligible for inclusion in the index.

Standard & Poor’s calculates the index exclusively using the LSTA/LPC mark-to-market pricing, which is based on bid/ask quotes gathered from dealers, to value each tranche in the index. S&P Loan Commentary and Data, an information provider to the leveraged finance community, is the source of loan data and the calculation agent for these indices.

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