Panellists on Creditflux’s CLO webinar described how CLO spreads are close to historic tights, ESG is entering the docs and managers have more flexibility with work-outs than ever before

Sallerson recalls how low CLO triple A spreads were in the 2000s. He expects there to be far greater differentiation between managers this year because a lot of CLO managers are good at picking credits, but some do not have a lot of experience with workouts.

Yes, the arbitrage between CLO assets and liabilities is tight. But CLO funding costs are at 150-155bp, which is not far off historic tights back in early 2018, and means 2021 CLOs could outperform over time.

The sell off last year highlighted that giving away flexibility in a loan work out was dangerous for all CLO investors. That appreciation has resulted in CLOs being given greater ability to participate in loan restructurings.

That’s compared to other assets of a similar profile, which suggests there is room for further spread tightening.

... which is a diverse portfolio of loans.” Gleysteen says he launched AGL with a view to launching low-levered loan funds, rather than CLOs.

Panter says she recently sold a B3 credit that pays 325bp and trades at 99, but is in breach of a revolver covenant of 10.5 times levered. She replaced this with a new issue B3 loan paying 450bp, which is 4.5 times levered.