Loan managers are waiting on the sidelines before raising new deals after expectations of a downpour of mergers and acquisition and leveraged buyout credits turned to a drizzle. "A lot [of managers] are saying they are looking, but they cannot get assets," said one buyer of collateralized loan obligations for a bank. "They say they will call the placement agents when they are ready," he added.
Amy Gibson, a v.p. who manages the leveraged loan assets for 40/86 Advisors, formerly Conseco Capital Management, agreed. "The supply expected earlier in the year did not materialize, but there has been a recent pickup in new deals and LBO activity, which is encouraging." But she added, "Everyone is on the sidelines right now." Gibson explained that 40/86 would like to do another CLO later in the year, but it will be determined by the collateral supply in the market. She noted that so far in 2004, new supply has been constrained and combined with the refinancings, this has limited the supply of new loans.
A CDO manager that has recently priced a new deal noted that the economics, though tight, definitely make sense. "The cost of the liabilities has tightened but the big question is accumulating collateral," he said. Buyside firms that are currently in the marketing phase include The Carlyle Group, Prudential Investments and American Express Asset Management.