Jefferies’ second year as a force in Europe's primary CLO market saw the firm secure a second consecutive win for excellence in the asset class. Strong relationships on the buy and sell side, combined with an unparalleled ability to time the market, helped the firm dominate the league tables and earn a well deserved win as CLO Bank of the Year.
If 2021 was the year Jefferies proved it had built a world-class team, 2022 allowed the bank to show just how well it could perform in a far more challenging market. Rising inflation was already a problem when Russia’s war in Ukraine created an even more volatile backdrop. In the wake of the invasion, only Jefferies was able to accelerate its CLO issuance, pulling far ahead of its peers despite the market challenges.
Many of these deals printed with very strong execution at a difficult time and I think clients were very happy with the outcome
“Looking back one of our strengths was to be proactive in tapping the market,” says Hugh Upcott Gill, primary CLO co-head. “Many of these deals printed with very strong execution at a difficult time and I think clients were very happy with the outcome.”
Managers had become used to the relative calmness of 2021, but turbulence saw them turn to their arranging banks for guidance. The diverse range of managers that Jefferies worked with last year included household names like Carlisle, ICG and CBC as well as newer managers less well-known in Europe.
“When the market is volatile like it was last year our job is to present structural solutions to our managers on how they can execute deals,” says Laura Coady, head of securitized markets group for EMEA and co-global head of CLOs. “We were able to move very quickly to identify windows and read the market.”
All this translated into an impressive market share of just over 25% of total CLO deal volumes in Europe - almost doubling the bank’s share from 2021 and putting it far ahead of the closest competitor. In the refi/reset segment, where supply faded as spreads widened, Jefferies worked on more deals than the second and third place arrangers combined.
When the market is volatile like it was last year our job is to present structural solutions to our managers on how they can execute deals. We were able to move very quickly to identify windows and read the market.”
Guiding new issuers to market in a turbulent backdrop became a far more critical part of CLO supply in 2022. Jefferies finished the year top of the new issuance league table with almost 25% of total volumes - more than twice the share of the bank in second place.
The firm’s relationship with investors was key to navigating the market, and its consistent deal flow helped maintain a regular dialogue around deal and non-deal issues. “We benefit because having a good volume of deals allows us to stay close to the market and be constantly aware of what investors are thinking and how they are responding,” says Upcott Gill. “The insight into what the buy side is doing on a daily basis is very valuable for talking issuers through their strategy."
Jefferies consistently pinpointed windows of liquidity where managers could execute successful transactions. These were often followed by a sell-off that presented clients with a buying opportunity on the loan side. “It was really about trying to pick the right time and making sure we were in front of managers continuously presenting them with opportunities,” says Coady. “Jefferies works with a great bench of managers who were very receptive to moving forward.”
Some of the most disruptive events in 2022 helped the bank highlight the strength of CLOs as an investment tool. A UK pension fund crisis focused on liability-driven investment saw CLOs emerge as among the best quality and most liquidity assets on funds’ balance sheets. “We've worked to engage with new investors and demonstrate just how durable this product is,” says Coady. “That’s definitely helped us expand the buyer base.”
Jefferies also stood out for its impressive secondary trading and distribution, which complements its growing European leveraged finance operations. Towards the end of 2022, the bank hired Steve Tubb as head of European secondary CLO and ABS trading. The appointment of an industry veteran with a stellar reputation provided yet another signal to the market of Jefferies commitment to CLOs and the wider securitization space.
“Clients were very impressed with the hire, which was a big statement from Jefferies that shows how the firm is expanding and growing across the whole of the securitization business,” says Upcott Gill.