CLOs

Jefferies has taken two more bankers from Citi’s EMEA CLO operation to join former syndicate head Laura Coady in setting up a primary CLO team and overhauling its European securitized products business.

A growing number of CLO managers are re-entering the primary market, encouraged by demand from investors facing a dearth of new supply in the second half of 2020.

BlueBay Asset Management issued its debut European CLO on Monday, printing the tightest triple-A rated notes since the market restarted after the coronavirus pandemic began, a clear sign of the improvement in credit conditions. The issuer also opted to place a full capital structure down to single-B rated notes, an approach which many managers have shied away from the since the virus struck.

Fair Oaks Capital has hired structured finance professional Christos Danias to run marketing in its European CLO group.

Some CLO managers in Europe are discussing new warehouse lines, paving the way for the CLO primary market to restart after pre-Covid deals are cleared. Counterparts in the US, meanwhile, are riding a wave of optimism that will likely take the market back to pre-pandemic pricing levels over the summer. Owen Sanderson and Paola Aurisicchio report.

BlueMountain Capital Management is readying a "print and sprint" CLO, joining a handful of managers that have opted for a speedier deal execution in the Covid era.

The months since the coronavirus outbreak have been a difficult period for the CLO market, as waves of loan downgrades and corporate bankruptcies create a turbulent environment for mangers to steer their deals through. Since March, the CLO space has seen various strategies employed by both managers and investors to mitigate the effects of the crisis. The pandemic has been a period of distress, but could also be a chance for players in the market to differentiate themselves and stand out, according to Allison Salas, CLO research analyst at DWS Investment Management. Salas spoke with GlobalCapital’s Max Adams on the evolution of CLO documentation, manager strategies and the implications of the Covid-19 outbreak for Libor transition.

June opened up with another wave of negative rating actions for CLOs, with $5.7bn of the bonds placed on review for possible downgrades by Moody's, driving concerns that managers could see their ability to trade loans restricted if downgrades pile up.

Despite warehouse lines that have time to run, the rally in leveraged loan markets is forcing CLO managers and equity holders to push ahead with deals, in case they are left buying assets at prices close to par with vehicles far more expensive than before the coronavirus hit.