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BWICs spike and spreads widen but market remains constructive
Resets and refis prominent in pipeline as loan market softens, offering respite from repricing wave
Dasha Sobornova joins from Akin Gump with experience across asset classes
Trade body for levfin investors turns to leading rating analyst
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The Federal Reserve said this week that it would revive its Primary Dealer Credit Facility, expanding the program to include triple-A rated CLOs, as the central bank dives deeper into the crisis era playbook to stem the fallout from the coronavirus crisis. -
An expected wave of defaults in corporate credit is driving stress in the CLO space, spurring some in the market to begin internal discussions to make their pitch to the government for greater protections.
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The high volume of bids wanted in competition (BWIC) registered last week in CLOs dropped on Monday as credit instability increased and investors asked for greater protections as Libor craters.
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Last week European securitization markets saw a heavy supply of BWICs (bids-wanted-in-competion), with over €487m of CLO bonds on offer. But few of the bid lists are finding clearing levels, with 64% did-not-trade in CLOs last week.
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Static securitizations of a pre-crisis vintage were among the poorest performers of the post-crisis era, as mortgage standards slipped into the boom year of 2007. But CLOs printed in the 2006 and 2007 are among the best deals ever done in the market, giving managers locked up leverage and the flexibility to exploit a huge market dislocation. Could the 2020 crisis see the same?
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Financial market tumult and global instability as a result of the coronavirus pandemic are hitting CLO primary issuance, while activity in the secondary market is accelerating as investors hunt for opportunities amid the chaos.
