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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More insurance companies may soon turn their attention to the CLO market, according to one of the world’s largest insurance company asset managers. -
Mezzanine spreads have widened in European CLOs by 100bp-200bp in a matter of weeks, with further volatility expected, but one investor said on Tuesday there was no need to panic.
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A struggling global economy and a sluggish US recovery has raised the spectre of negative US interest rates, giving CLO investors another item to add to a growing list of concerns in 2016.
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European CLO managers have expressed concern about the state of the European market, despite suggestions the market offers relative value compared to its US counterpart.
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Credit Suisse reported a loss of Sfr6.44bn for the fourth quarter of 2015, as the bank’s restructuring ramped up and it crammed exceptional items into last year’s numbers. Like Deutsche Bank in the third quarter, a chunky goodwill writedown was the main culprit. But the bank also suffered from its exposure to leveraged loans.
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CIFC made headlines last week when it announced that it had engaged JP Morgan to explore “a range of strategic alternatives” to its business model, but rumours of a definitive sale or merger with another manager are premature.
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The US CLO market is looking to Japan and other Asian markets in order to find triple-A buyers as the pool of investors interested in the debt continues to shrink.
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CLO managers and investors may want to look beyond the struggling commodities sector for signs of default risk, as idiosyncratic and one-off defaults in industries such as healthcare and retail will also pressure the CLO market in 2016.
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Mezzanine CLO spreads have widened in the secondary trading as credit markets remain under pressure from the widespread volatility that has characterized the year so far.
