The collateralized loan obligation market is set to finish 2004 on a tear with a mob of loan managers raising funds. Four Corners Capital Management, MJX Asset Management, Nomura Corporate Research and Asset Management and TCW are among the shops seeking to raise money as conduits and structured investment vehicles load up on CLO paper. According to J.P. Morgan, U.S. CLO volume is $25 billion year-to-date compared to approximately $16 billion for the whole of 2003.
In addition to a resurgent appetite from traditional buyers, several factors are driving the demand. J.P. Morgan has reportedly said it will nearly triple sales of CLOs through investors in Japan for 2004. Meanwhile, negative basis traders--investors who purchase a AAA-rated CLO note and simultaneously purchase credit protection from monoline insurers through a credit default swap--are active, as are insurance companies looking for yield (LMW, 11/19).
The Four Corners deal is being led by Morgan Stanley and is initially slated at $300 million, said a market participant. Four Corners was set up in 2001 and early on stumbled in its attempts to raise a CLO during very tough conditions in the debt markets (10/20/02). Since then, the L.A.-based firm has amassed more than $2.3 billion in assets through retail loan funds, four private funds and a portfolio of structured assets. Mike McAdams, president and ceo, did not return calls. A Morgan Stanley spokesman declined comment.
MJX's $300 million deal called Vista Leveraged Fund I is being led by Credit Suisse First Boston, said one loan portfolio manager. MJX is run by Hans Christensen, who declined comment on the deal. A CSFB banker did not return calls. A Nomura official also declined comment on the $300 million Clydesdale Strategic CLO, also reportedly led by CSFB.