Morgan Stanley analysts described the potential rollback of risk retention rules for US CLO managers was a “modest positive” for the market on Tuesday, adding $10bn to their 2018 issuance forecast, but they warned that credit quality could suffer in new deals because of the scarcity of leveraged loans.
Premier Oil’s restructuring last year was a test for the risk transfer market, as the different synthetic securitizations exposed to the troubled firm reacted very differently. The European Banking Authority wants to see a tougher approach and more consistency in the market, which could hurt some firms’ ability to transfer risk.
First time issuers are dominating activity in the growing market for commercial real estate CLOs, with Bridge Debt Strategies the latest debut real estate investment trust to tap the market.
Shares in US CLO manager Marble Point’s listed loan fund were admitted to the London Stock Exchange on Tuesday, after the firm successfully closed a $42.5m initial public offering on Friday.
US high yield bonds have been jittery in recent days but the loan market has largely held firm, with few opportunities for CLO managers to buy assets on the cheap. The riskiest pieces of CLO debt have shown some vulnerability to market pressures, however.
A ruling last week by a US court exempting CLO managers from risk retention rules should boost supply of US CLOs, though demand may suffer, as regulated European investors will no longer be able to buy into US deals, said bankers. Likewise, European CLO spreads may tighten as the supply of compliant paper dwindles.
GlobalCapital revealed the winners of its Syndicated Loan and Leveraged Finance Awards 2017 at its 15th Annual Loans Dinner on Wednesday. Banks and borrowers from all over the EMEA region attended the dinner at the new venue of Gibson’s Hall in Bishopsgate, London.
In a big vote of confidence in the CLO product, the District of Columbia Court of Appeals ruled on Friday that CLO managers should be exempt from risk retention requirements, vindicating the arguments put forward by the Loan Syndications and Trading Association against federal regulatory agencies.
Equity market turmoil has brought the US high yield market down from exuberant levels, but some investors have welcomed the move and are confident that primary market activity will soon pick up, despite one borrower scrapping a deal on Tuesday.
Argentic Silverpeak has announced a debut US CLO backed by commercial real estate loans, following the pricing of a $932m TPG Real Estate Finance deal on Monday, as tight pricing encourages borrowers to turn to the capital markets to finance short dated real estate lending.
CLO equity investors expressed strong interest for the €509.25m Barings Euro CLO 2018-1, with the equity tranche four times subscribed according to a market source.
Enjoying its busiest start to the calendar year since 2013, the US CLO market steamed ahead last week with triple-A new issue spreads touching the 100bp milestone. Bank of America Merrill Lynch cautioned last Friday on the risk of market volatility seeping into the underlying loan market, however.
Slow settlements and burdensome admin in the European leveraged loan market have been delivering risk-free profits to some loan arrangers — leaving loan funds and CLO managers fuming, and prompting a move from the Loan Market Association to work on a fix. But in a hot market, voluntary guidance may not be enough.
The European Banking Authority’s plans to level the playing field for synthetic securitization could raise the cost of such deals for banks supervised by the European Central Bank’s Single Supervisory Mechanism (SSM), slowing down a market which has boomed in the last two years, and forcing banks to look elsewhere for capital relief.
Promoted By CGIF
Want full access to GlobalCapital?
If you are new to GlobalCapital or you already subscribe to some of our channels you can still easily extend your access.
Take a trial to the entire site or subscribe online to see all our capital markets news, opinion and data sets.
Don't miss out!Free trial
Read the magazine on your mobile device
Latest news by market and league table performance
|Rank||Lead Manager/Arranger||Total Volume $m||No. of Deals||Share % by Volume|
|1||Bank of America Merrill Lynch (BAML)||7,026||25||11.95|
Bookrunners of Global Structured Finance
|Rank||Lead Manager||Amount $m||No of issues||Share %|
|2||Wells Fargo Securities||9,068.95||28||9.41%|
|3||Bank of America Merrill Lynch||8,771.28||25||9.10%|
|5||RBC Capital Markets||4,569.28||13||4.74%|