Welcome to your weekly update on the SPDR® SSGA IG Public & Private Credit ETF (PRIV) and soon to be the SPDR® SSGA Short Duration IG Public & Private Credit ETF (TBD) too.
Thanks for reading!
This Week:
Relatively short update with some fun life stuff and some complaining.
Life stuff:
Maybe no one cares about this part but I like writing it.
I’m finally fully recovered from my triathlon last weekend and launched my summer project of biking 4 miles to our local community pool (that happened to open the day after my race), swimming, biking back, grabbing my dog and running. I’m trying to do it every single day that the weather cooperates and I’m 3/3 so far.
Our old sand-bottom home pool is now open and my wife and I are preparing for the rite of ownership every Cape dweller must pass. Having a calvelcade of visitors in July and August. It’s part of the territory and we’re polishing up all the bits and bobs to make sure our tiny little house is ready for guests.
This is our doormat.
Complaining stuff:
I’ll just make a list here and you’ll see me dig in down below.
Trade volume repoting issues.
Asset par values
Interest marking and/or lack thereof.
All I Do Is NAV
Here’s the NAV History file - Updated daily but has historical data.
No new shares even with the “largest trading day since launch”[1]
[1] This is under dispute.
Volumes:
Slight disparity here. Honestly, I don’t know how to explain this one.
sigh
The daily volume reports at 375.7k which would be the biggest day of trading since launch. It would also add up to the second most active week of trading after launch week.
HOWEVER
If I zoom in to check the actual trades, the volume… disappears. Where has it gone? Over the rainbow? Down a well? Into the great beyond?
Sidebar: (Warning: VERY LOUD METAL)
This is the first result for Into the Great Beyond and it’s loud as hell metal.
Hell yeah!
Anyway, I don’t know what’s happening with this. Even 375k of volume isn’t that notable beyond behind the highest for this very lightly traded product. Even at 500k a day, we’re looking at 110 days to turn over the portfolio (Yes, I know fixed income doesn’t care as much about that but it’s fun to talk about!)
I checked some other sources and called in a few little favors and no one else seems to know what the hell is up with this. I’m gonna call it bunk until someone actually shows me the prints.
Holdings:
Additions:
None
Deletions:
None
Issues, Marks and Meta:
Issues and Meta:
Well, until this morning at around 8am this was shaping up to be one of, if not the most, boring updates so far.
Thankfully, dearest fairest readers, you get a full on gripe today. Bearing the brunt of my ire today is AP GRANGE. If you’re following along at home and downloading holding files (I’m kidding, literally no one does this for PRIV but me) you may have noticed that day over day there were some changes.
All highlighting is mine.
So I transfered the holdings data into my model this morning and was expecting to see a nice 22.184 and 541.666~ in my daily changes. Juneteenth was on Thursday so this should have contained 2 days of interest accrual and little else.
Both of these pieces have been otherwise static for quite awhile.
Instead, the deferred interest portion had been kicked up by $20,524.75 and some rounding.
The par value of the main asset has NOT changed. So what the hell. Why?
This is a teachable moment. I find myself not wanting to go too far in the weeds for people relatively unfamiliar with interest only and deferred interest covenents but this whole thing is pretty complicated and I’m largely guessing at what’s happening anyway.
This is a PIK loan. What’s a PIK loan? Here’s my favorite comic again.
So I think what is happening is that they’re shifting the accrued interest from the main AP Grange asset to the deferred interest asset because no payments are taking place yet due to covenent or structure.
They are leaving a certain amount (in this case $3300) in based on what they think the underlying asset’s mark has done sans interest. If we generously back out the usual 2 days of interest accrual, we get $2758 and some cents worth of actual increase in market value. That’s useful information!
What’s telling is that the par/market values for the deferred interest portion have been set equal. If this was NOT the case, I would have thought this may have been an error.
I dug back into the history and this did indeed occur over the weekend between 3/14 and 3/17 in March. They actually liquidated the other two AP Grange pieces that day and I had assumed (now incorrectly I think) that they had simply consolidated the two positions as the main asset grew from 1mm to 1.5mm and the deferred holdings jumped up by a near-ish enough amount to what the sub deferred interest holding was.
I will say mea culpa for that. If I had some kind of public record of a deal structure in front of me I could maybe understand a little better what’s happening. I wonder why I don’t.
;)
Ok. Other than that, things were fairly uninteresting on the private asset beat. There was some small par value shenanigans with a few of the AOS Assed Backed Finance tagged things but I will leave that to those with higher budgets to use Bloomberg to back in to.
Marks:
There isn’t a huge amount to comment on here. The performance is pretty middling.
Tune back in next week and we’ll see what else has managed to change!
Other Stuff:
Go read these people:
Dave Nadig : Nadig.com
Tony Dong : Linkedin
Jeff Ptak : Substack | Morningstar
Tematica Signals : Substack
Phil Bak : Substack
CovenantLite : Substack
Brent Sullivan : Substack
Leyla Kunimoto : Substack
also anyone I subscribe to on Substack. I actually do read them!
Thanks for reading.
If you want to chat about PRIV/other topics or hire me, please reach out to cmacwilliams@outerbeachc.com, connect with me on LinkedIn, or shoot me a note on Signal at @ ConorMac. 76.
Disclosure: I own one share of PRIV, none of this is investment advice and is presented solely for educational purposes.