Latest news
Latest news
Tight loan market makes it tricky to ramp CLO portfolios
Triple-As land 8bp back of recent tights as manager keeps the equity
Demand is expected to come from Europe, LATAM and Asia
More articles
More articles
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CLO managers have begun to reset their Covid-era deals, slashing liability costs, as illustrated by AGL Credit Management, which shaved 114bp off the margin of a senior tranche originally priced in April 2020. -
Ivy Hill Asset Management, an affiliate of Ares Management, has returned to the CLO primary market after a three year hiatus with a CLO backed by loans to middle market companies.
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Symetra Financial Corporation, a financial services insurance company and the US subsidiary of Japan-based Sumitomo Life Insurance, increased its investment in CLOs by $1bn during 2020, and may have increased the pace of buying more recently, taking 'sizeable' positions in triple-A tranches from from late last year, according to a source.
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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.
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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.
