Many investors have the perception that the below-investment-grade ratings carried by senior loan-issuing companies signify a lack of size, skilled management, or even profitability. While such companies do exist, below-investment-grade ratings are typically assigned to entities that choose to capitalize themselves with more debt relative to their investment-grade counterparts.

The reality is that senior loan issuers are generally well-functioning companies, many with whom you might be familiar.

Household Names Issue Senior Loans

Many senior loan issuers are well-known industry leaders. Household name companies have issued or do issue senior loans, which may help them lower interest costs and/or provide more flexibility in terms of refinancing versus other forms of debt.

Exhitbit 1: Examples of Senior Loan Issuers and Their Amounts of Outstanding Loans (in millions)

On average, senior loan issuers have successfully met 96.8% of their scheduled interest and principal obligations. This is implied by a long-term default rate of 3.2%.1 Importantly, in the rare case of default, senior loan investors would collect ahead of high-yield bondholders and equity shareholders.

Looking for?

  • High income potential, low volatility relative to high-yield bonds, and potential diversification benefits?
  • Lower interest rate risk exposure than traditional fixed income?
  • A time-tested investment team and process?

Oppenheimer Senior Floating Rate Fund has historically provided higher yields than traditional fixed income, as well as its peer group average.2 The Fund is managed by the Oppenheimer Senior Corporate Loan Team and has had the same portfolio manager at the helm since the Fund’s 1999 inception. By employing a fundamental, bottom-up approach that looks at the senior loan market on a security-by-security basis, the team and Fund have historically offered investors solid yields and performance relative to peers.2

Exhitbit 2

 
  1. ^Source: JPMorgan Research, 12/31/16. Long-term default rate refers to the period 1998–2015.
  2. a, bSource: Morningstar, Inc., 9/30/17. The Morningstar Bank Loan Funds Category Average is the average return of all funds within the investment category as defined by Morningstar. Returns include the reinvestment of distributions but do not consider sales charges. Performance is shown for illustrative purposes only and does not predict or depict the performance of the Fund.