Lien Services Market Overview
The lien services market in the US is not specifically defined, this is because it encompasses aspects of several markets, rather than being its own distinct market. The leveraged loan market encompasses the lien market, and I have found the top 13 players in this market in the US. I have also found top trends within the lien and leveraged loan market.
In order to answer this question I searched for market reports, as well as online articles and news stories published on the topic in the past 2 years.
I found that a lien is defined as "a legal right granted by the owner of property, by a law or otherwise acquired by a creditor". An example of a lien include bank loans granted to purchase automobiles. If the person cannot pay back the loan, then the bank may execute the lien, seizing the vehicle still requiring the person to repay the entire loan. Taxes are another area where liens are commonly used. For example, in the US the IRS may claim ownership of a person's property if they fail to pay their taxes. Therefore, liens are actually part of several distinct markets.
There are no market reports on the lien services market in the US or global. This has led me to conclude that lien services market in the US is not specifically defined. I believe that this is because the lien services market encompasses aspects of several markets, rather than being its own distinct market. It is related to tax paying, automotive loans, leveraged loans, and more. Therefore, there have not been key players defined for this market, or major trends. After searching through market reports I also searched for online articles and news stories published on the topic, but again found that there is very limited information available on the lien services market.
Because liens (both first and second) are also a kind of leveraged loan. For this reason I have also included data on the leveraged loan market in the US, as data on the lien market is sparse.
Traditional lenders are usually the main players of the leveraged loan market, however, tighter regulation of these traditional lenders has opened a window that the private equity firm KKR have taken advantage of. They now find themselves in 13th position in terms of main players in the leveraged loan market. The Financial Times identify the top players as:
1. Bank of America
2. JP Morgan
3. Goldman Sachs
4. Credit Suisse
6. Deutsche Bank
7. Wells Fargo
9. Morgan Stanley
12. SunTrust Robinson
1. Huge growth in the market:
In 2017 the US leverage loan market grew to a record $909 billion. This growth is expected to continue at speed, and break new records next year. Investors are "favoring loans in the technology, healthcare, industrials and packaging sectors" to be the main areas of growth.
2. Leveraged loan sales are outpacing debt issuance:
Currently, leveraged loan sales are outpacing debt issuance. This trend is expected to continue into 2018. "Demand is expected to remain firm for the asset class as the Federal Reserve lifts interest rates further and central banks begin winding down stimulus."
3. Drivers of the market:
CLOs are the main driver of the leveraged loan market. The CLO market has recognized that there is value in the refinancing option, and this has boosted the leveraged loan market. This trend can be expected to continue as CLOs gain steam, even amid concerns expressed by debt holders. In addition to this, since 2016, refinancings and repricing have been primary drivers of the market. Finally, growth drivers in the leveraged loan industry have also been identified as: Retail investors pouring money into U.S. loan funds, and issuance of collateralized loan obligation vehicles (CLOs) rebounds in the second quarter.
4. The rise of second-lien:
A recent repricing surge has boosted demand for U.S. second-lien loans. The second-lien volume of $8.61bn in the first quarter of 2017 was more than five times higher than the $1.54bn it was in 2015. Second-lien have become first choice over first-lien. "Strong investor demand is allowing US private equity firms to use increasingly large second-lien loans to maximize the amount of debt and leverage that they can raise to finance buyouts".
5. Use of AI:
AI is now being used within the market, currently it is being used in the real estate industry for deal matching. AI has been developed so that "Real estate investors can set their investment criteria and be notified when a deal matches their criteria". "If an investor is interested only in a first lien position on commercial properties earning at least 10% returns, they can set those criteria on their investor dashboard and get a list of properties matching those criteria".
Blockchain has entered into the leveraged loans market. "Coordinators of a blockchain project backed by the financial industry say they have successfully demonstrated that the distributed ledger technology can be used to syndicate, trade and make payments on leveraged loans."
To sum up, I have found that the lien services market in the US is not specifically defined, this is because encompasses aspects of several markets, rather than being its own distinct market. However, it is part of the leveraged loans market, the main players of which are Bank of America, JP Morgan, Goldman Sachs, Credit Suisse and Barclays. I also identified main trends within the lien and leveraged loan market as being: Huge growth in the leveraged loans market, leveraged loans outpacing debt issuance, main drivers of the leveraged loans market, the rise of second-lien, use of AI and blockchain. Finally, I found that technology, healthcare, industrials and packaging sectors are key clients (industries) within the market.