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Latest news
Borrowers take advantage of robust CLO demand to tighten leveraged loan pricing
New realm for ex-Natixis banker, as HSBC Innovation Bank hires
Manager reset the deal for the second time as the end of its reinvestment period approached
More articles
More articles
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NatWest Markets is offering warehouse terms for new CLOs again, reflecting the reorganisation of the bank’s operations and an increased focus on sponsor financing for the UK bank. -
CLO debt investors are demanding cleaner CLO portfolios with underlying collateral less vulnerable to the impact of Covid and with high recovery prospects. With US CLO supply volumes at record levels, investors have the opportunity to pick and choose their deals, pushing managers into a fight over pricing and portfolios.
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Investors are once again willing to bet on longer duration deals, making CLOs with five-year reinvestment period the common choice and pushing more managers to reset deals instead of repricing some tranches.
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High levels of CLO supply has started to put pressure on the top of the capital stack, with triple-A spreads softening after a three month rally. For some sources the unrelenting CLO volume, both new issue and repricings of existing deals, is the beginning of a period where plentiful supply makes investors more selective.
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Last year’s market crash and then screaming rally might have been a rough ride for CLO managers and investors alike, but it has stimulated innovation and maturity in a market which, in Europe, still had some growing up to do.
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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.
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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.
