The US new issue CLO market sprang to life this week, cheered by investors who have complained about the high volume of refinancing and reset activity that has dominated the market in October.
US CLO investors, managers and analysts say that a dip in credit quality is the biggest issue facing the market next year, against the backdrop of soaring leveraged loan prices and rising rates hindering the ability of companies to pay off debt.
3i has sold its debt management business to Bahrain-based private equity firm Investcorp, while Tikehau Capital will boost its CLO business with the acquisition of Lyxor’s €700m European debt funds.
Spreads on US CLOs are grinding ever tighter, though not from improving sector specific fundamentals. Observers say that tighter pricing is being determined by broad issues driving investors to the sector.
As the US CLO and CMBS markets debate the viability of horizontal versus vertical risk retention, the market is quietly discussing a third solution to this year’s favourite fixed-income conundrum.
US CLO investors are questioning the staying power of the recent trend of CLO resets and refinancings, which have outstripped the pace of new issuance considerably in the past few weeks.
Spreads on European triple-A CLO paper have hit a new post-crisis low, after KKR Credit Advisors and Tikehau Capital Europe closed deals at the end of last week.
CLO refi and reset deals are cannibalising new market issuance, to the chagrin of some investors who want to see more true new issue paper.
Loan funds are taking a growing share of new issuance in the leveraged loan market, putting the squeeze on CLO managers who are fighting for allocations to fuel new structures, according to a report from Fitch Ratings.
US CLOs are grinding tighter as buyers reach for yield, but CLO investors say that the bonds are still cheap and provide solid relative value compared with other fixed income assets.
Private equity firms have jumped on the recent rally in ABS spreads to dust off loan portfolios for public syndication. The structures are bespoke, and the deals are one-offs — a far cry from the market being just another funding tool for banks. But that's OK.
US CLO triple-A paper is attracting strong demand from buyers across the globe. But there is disagreement among investors over the relative value of paper from first and second tier managers.
Issuers priced three new European CLOs at the end of last week, as well as the repricing of Carlyle’s 2013-2 deal, as a swarm of new and returning investors pile into European structured credit.
Axa Investment Managers has merged its alternative solutions and structured finance teams to form a single alternative credit offering as investors hunt harder than ever to find elusive yield.
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Most Viewed: Securitization
|Rank||Lead Manager/Arranger||Total Volume $m||No. of Deals||Share % by Volume|
|2||Bank of America Merrill Lynch (BAML)||6,901||20||10.32|
Bookrunners of Global Structured Finance
|Rank||Lead Manager||Amount $m||No of issues||Share %|
|1||Wells Fargo Securities||68,611.22||170||11.38%|
|2||Bank of America Merrill Lynch||59,056.08||169||9.80%|