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Dasha Sobornova joins from Akin Gump with experience across asset classes
Trade body for levfin investors turns to leading rating analyst
Demand for riskiest tranches and improved loan supply could support growth in issuance
Dana Point 'no longer the end' of the year as market retains momentum
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Positive momentum on liability spreads and attractive equity arbitrage are driving the surge in new CLO warehouse openings, with activity back to pre-Covid levels. -
CLO markets have snapped back to pre-Covid levels and structures, but with two major differences — easier rating rules from Moody’s and the rush to allow managers flexibility to own workout loans. While the Moody's changes have been accepted by the market, workout loans remain more controversial, but are gaining traction as the flood of resets permits managers to update their docs.
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Sound Point has set a new standard for the European CLO market by bringing a deal to market with a five year reinvestment period, a structure common in the US but largely absent in euros, even pre-pandemic. The deal also saw a healthy spread of equity demand, GlobalCapital understands, underlining the potential for strong supply even from those managers without captive vehicles to hold their subordinated notes.
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CLO markets on both sides of the Atlantic are suffering from a surfeit of supply, according to traders, managers and investors, with the softer tone showing up in mezzanine tranches following near-record volumes of new issue and refi supply in the past months.
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Palmer Square Capital Management has joined a handful of CLO managers that are adding single-B tranches to their US deals, a layer of the capital structure more frequently issued when the market is 'hot', to satisfy investor demand from hedge funds.
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Traders say the CLO market is suffering from new issuance fatigue, while worries over inflation and rising Treasury yields have also begun feeding into the European secondary market. But any softness is unlikely to last long, given a strong longer term technical backdrop.
