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Despite unfavourable equity arbitrage, CLO issuance continues at pace
Triple-A rated CLO spreads tighten at last and a template is established for European data centre ABS
Public versus private distinction scrapped for disclosure plus new, simplified templates for mature asset classes
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CLO industry participants are losing hope for a regulatory or legislative fix to ease the Volcker Rule’s impact on banks investors, especially after the Federal Reserve confirmed that its two year extension for banks to make their deals compliant would not apply if those securities change hands.
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CLO industry participants are losing hope for a regulatory or legislative fix to ease the Volcker rule’s impact on banks investors, especially after the Federal Reserve confirmed that its two year extension for banks to make their deals compliant would not apply if those securities change hands. -
Restrictions on covenant-lite loan buckets have become commonplace in European CLOs this year amid a trend of increasing deal sizes, just as some market participants have begun to fret about riskier asset selection.
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European CLO managers and investors believe underwriting standards in Europe’s leveraged loan market are weaker now than before the 2008 financial crisis, but that with limited primary activity in the leveraged buyout market cov-lite loans are still not a “major issue” in Europe.
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CLO managers may be more inclined to amend existing deals to make them comply with the Volcker Rule now that the US Federal Reserve has given bank investors an extra two years to make sure their CLO holdings conform. But that doesn’t make it any easier to do in practice, CLO market participants have told GlobalCapital. And the potential changes could put too much pressure on equity investors.
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CLO managers may be more inclined to amend existing deals to make them Volcker-compliant now that the Federal Reserve has given bank investors an extra two years to make sure their CLO holdings conform. But that doesn’t make it any easier to do in practice, and the potential changes could put too much pressure on equity investors, CLO market participants told GlobalCapital on Monday.
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The declining arbitrage levels in the European broadly syndicated loan CLO market are not leading managers to change their approach to asset selection, Moody’s analysts told GlobalCapital this week.
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The Fed risks derailing the lobbying momentum for grandfathering of existing deals with its decision to give banks two more years to make sure their CLO investments conform with the Volcker Rule’s ban on deals that include bond collateral, sources told GlobalCapital this week.
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The Fed’s decision to give banks two more years to make sure their CLO investments conform with the Volcker rule’s ban on deals that include bond collateral falls short of the full grandfathering regime the industry was hoping for — and risks derailing the positive momentum the market chose to believe was driving efforts to soften the impact of the rule, sources have told GlobalCapital.
