Latest news
Latest news
Lower pricing across CLO capital structure does little to improve equity arbitrage
Manager tightens triple-A pricing by 27bp and avoids refinancing some junior mezzanine notes
Spread on triple-A rated notes 4bp wide of recent tights
More articles
More articles
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A flood of investor cash into US middle market lending is pushing more aggressive underwriting, as lenders compete for investment opportunities and debt investors chase yield in CLO structures. -
CLO manager Neuberger Berman said on Thursday that it had closed its CLO risk retention vehicle with around $450m of committed capital to invest in risk retention financing.
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PGIM and Octagon were active in the US CLO market on Monday and Tuesday this week, as new CLO formation is said to be building momentum despite the difficulty of attracting equity investors given the squeeze on returns at the bottom of the structure.
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Bank of Montreal is set to launch a synthetic ABS deal this week, shifting the risk on a $1.5bn portfolio of US and Canadian large corporate loans, with several European banks also understood to be working on risk transfer deals over the summer.
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CLO market sources say direct lending to European SMEs is growing quickly, with some lenders now approaching investors to gauge their interest in investing in private SME CLOs.
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The European CLO primary market is going strong as the market heads into late summer, with a slew of deals sold over the last week and buyers eyeing more to come.
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Long term investors such as insurance companies and pension funds are buying more mezzanine and junior CLO debt as spreads compress. Meanwhile, asset managers and hedge funds appear to be taking more defensive positions in what they say has become a rich market.
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Valeant Pharmaceuticals, the largest single company exposure in the US CLO market, announced a $500m debt redemption on Thursday with one investor saying debt holders would struggle to find similar returns in the current loan market.
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The direction of central bank policy is increasingly coming to govern Investment grade and high yield bond investors' hunt for yield, with many of the latter now looking to triple-C rated paper to better hedge against the risk of rate hikes.
