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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The US new issue CLO market finished last week with a flurry of deals. -
The US new issue CLO market sprang to life this week, cheered by investors who have complained about the high volume of refinancing and reset activity that has dominated the market in October.
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US CLO investors, managers and analysts say that a dip in credit quality is the biggest issue facing the market next year, against the backdrop of soaring leveraged loan prices and rising rates hindering the ability of companies to pay off debt.
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3i has sold its debt management business to Bahrain-based private equity firm Investcorp, while Tikehau Capital will boost its CLO business with the acquisition of Lyxor’s €700m European debt funds.
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Spreads on US CLOs are grinding ever tighter, though not from improving sector specific fundamentals. Observers say that tighter pricing is being determined by broad issues driving investors to the sector.
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As the US CLO and CMBS markets debate the viability of horizontal versus vertical risk retention, the market is quietly discussing a third solution to this year’s favourite fixed-income conundrum.
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US CLO investors are questioning the staying power of the recent trend of CLO resets and refinancings, which have outstripped the pace of new issuance considerably in the past few weeks.
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Spreads on European triple-A CLO paper have hit a new post-crisis low, after KKR Credit Advisors and Tikehau Capital Europe closed deals at the end of last week.
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CLO refi and reset deals are cannibalising new market issuance, to the chagrin of some investors who want to see more true new issue paper.
