According to a press release, the PowerShares Senior Loan Portfolio is anticipated to begin trading March 3, 2011, on the NYSE Arca under the ticker symbol BKLN. The PowerShares Senior Loan Portfolio is the first ETF that provides investors access to a portfolio of senior secured bank or floating rate loans. The fund is expected to issue monthly dividends.
“Senior loans can provide an attractive income stream for yield-minded advisors and investors interested in shortening portfolio duration,” said Ben Fulton, Invesco PowerShares managing director of global ETFs, in announcing the launch. “As a result of shorter maturities and a floating interest rate feature that typically resets quarterly, senior secured loans have the ability to keep pace with rate changes and have historically proven to be more stable than traditional high yield fixed-income investments”.
Senior loans – also called leveraged loans, syndicated loans, bank loans or floating rate loans – are privately arranged corporate debt instruments that provide capital to a company and are syndicated to a group of banks and institutional lenders. According to the announcement, the loans are typically secured by specific assets of the borrower such as property, plant, or equipment and are senior to all other outstanding debt obligations. Proceeds are often used to finance leveraged buyouts, mergers, acquisitions, stock repurchases and other transactions.
The PowerShares Senior Loan Portfolio (ticker: BKLN) is based on the S&P/LSTA U.S. Leveraged Loan 100 Index. The Underlying Index is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments. The fund will normally invest at least 80% of its total assets in the securities that comprise the Underlying Index.
The index consists of 100 loan facilities drawn from a larger benchmark – the S&P/LSTA Leveraged Loan Index which covers more than 1,100 facilities. According to the announcement, loans eligible for inclusion in the index must be U.S. dollar denominated, senior secured first lien, with a minimum initial term of one year, and a minimum initial spread of 125 basis points over LIBOR at the time of issuance. The underlying index which is compiled, maintained and calculated by Standard & Poor’s is rebalanced semi-annually and reviewed for deletions on a weekly basis.
More information is available at http://www.invescopowershares.com.