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CLO webinar
A brighter year ahead
March 2021 | Issue 232
Global credit funds & CLO's
March 2021
| Issue 232
Published in London & New York.
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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
“I remember doing triple As at 21bp and really hairy deals at 30bp”
Peter Sallerson, Senior director | Moody’s Analytics
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.
“This market requires equity investors to take a long-term view”
Amit Roy, Head of new issue US CLOs | Goldman Sachs
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.
“Covid gave us ammunition”
Maureen D’Alleva, Head of performing credit | Angelo Gordon
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.
“European CLO triple As at 80 are still appealing”
AnneMarie Flynn, Head of structured investments | AIB
That’s compared to other assets of a similar profile, which suggests there is room for further spread tightening.
“I asked myself, if investors want 7-10% returns, why not invest in one of the greatest asset classes…”
Peter Gleysteen, Founder | AGL
... which is a diverse portfolio of loans.” Gleysteen says he launched AGL with a view to launching low-levered loan funds, rather than CLOs.
“Earnings have been good, but credits are coming out of this very levered”
Lucy Panter, Partner and portfolio manager | Oak Hill
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.
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