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Latest news
Pricing on junior mezzanine notes is diverging as managers have to cope with difficult conditions
Manager extends non-call by a year, tapping into market for shorter-dated deals
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Spreads on triple-A notes have once again begun to tighten, following a pause while the market digested the heavy flow of new supply. Market participants expect further tightening could follow from June. -
Investor appetite for triple-B CLO notes has been a powerful lever encouraging managers to tweak regular CLO structures to boost the size of this tranche and diverting excess spread to shore up the rating. Colloquially known as ‘Kroll deals’, from the rating agency that rates these issues, some managers have structured tranches as large as $100m to satisfy insurers’ quest for yield. But the structure relies in part on sourcing loans at low prices.
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UK small business lender SME Capital could bring one of the first true SME CLO deals in Europe to market, once it builds up a large enough pool of collateral. The lender has just announced a funding deal with structured credit funds Prytania and Scio Capital, which will allow it to expand its lending capacity and build towards a full sized portfolio.
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Covid-era deals looking for cheaper liability stacks are beginning to flood the market with refi and reset transactions, as they hit the end of their one year non-calls. Canyon Capital has reset and increased the size of Canyon CLO 2020-1, cutting 74bp off the margin of a senior tranche originally priced in May 2020.
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More managers are eyeing the rare US CLO structure which combines both leveraged loans and high yield bonds, in search of more flexibility, and to capitalize on the mispricing between the high yield and leveraged loan markets.
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Apollo subsidiary Redding Ridge has boosted its CLO platform, hiring Patrick McCarthy from JP Morgan, and Andrew Croshaw from law firm Cadwalader.
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New issue CLOs are increasingly selling equity to multiple buyers, leaving no single investor with a majority position — signalling an end to the difficulties of last year, which saw managers without their own equity or committed partners struggle to come to market.
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WhiteStar Asset Management’s expansion into London could include the purchase of an existing CLO platform, according to chief executive Gibran Mahmud. The Texas-based firm, run by the former Highland Capital Management team, announced last week that it had opened a London office headed by executive chairman Gordon Neilly.
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Middle-market CLO issuance is set to accelerate towards the hectic pace set by broadly syndicated loan deal, driven by the large primary backlog and attractive market spreads. Top tiers managers are expected to issue more middle-market (MM) CLOs throughout this year and smaller managers are coming back to the market with their first deals of the year.
