JPMorgan last week landed more than $400 million in auctioned loans in one busy afternoon that saw collateralized loan obligation managers sell off three portfolios. In addition to a $109 million and a $298 million portfolio auction JPMorgan won, Wachovia Securities bagged a $65 million portfolio last Wednesday, according to traders. "The auctions were worth a little less than half a billion dollars; that is a lot to have in one afternoon," one trader said.
Dealers said the portfolios constituted about 90% par loans as well as some distressed names. There were more than 300 credits in all three portfolios, said a trader. Goldman Sachs was said to be cover bid for the largest portfolio, according to a dealer. That could not be confirmed. He said it includes 100 names including: SunGard Data Systems, United Airlines, Warner Chilcott and Smurfit-Stone Container.
The second largest portfolio consisted mostly of low coupon deals. One trader said most dealers bid for it. Credits included Hexion Specialty Chemicals, Horizon Lines, Goodyear, Georgia Pacific, Ameritrade, Delphi Corp.'s and Collins & Aikman's debtor-in-possession loans, Dex Media and RH Donnelly.
The smallest portfolio constituted a mix of par and distressed names, said another dealer. These include Movie Gallery, MaxCorp. and NorthWest Airlines. The cover bid on the smaller portfolio was 100.05, while the cover bid on the $109 million portfolio was 99.88. The cover bid on the largest portfolio could not be determined by press time.
Dealers said CLOs selling the portfolios were seeking to wind down their investments to obtain new issue. "There are CLOs that want to liquidate to get ready for new deals," said a trader. Another trader said CLOs may see it as a good time to sell because of the softening of the market. "The market [stinks]," said one dealer commenting on recent conditions. "Liquidity is shrinking as interest rates rise. It is causing some to liquidate positions." He added that it is a healthy correction to the market. "It was not long ago when we were trading mostly LIBOR plus 300 deals. Everything now is trading 1/8 to a 1/4 of a point lower every day. It is an adjustment of yield rather than problems with individual credits," he said.