Share this report:
January 2021 | Issue 230
CLO M&A to pick up with underperformers at risk
Hugh Minch
CLO manager consolidation is expected to be elevated into 2021 as the market recovers from the aftershock of covid-19, according to market sources. One CLO investor tells Creditflux that an issuer that has been printing CLOs since the early 2000s is exploring a sale of its business.
There are 160 managers globally with at least one CLO outstanding, but several of these firms have been dormant for years. This includes Global Leveraged Capital, which issued a US CLO in 2006 and has not returned to the primary market since.
CLO managers which performed poorly in 2020 will be among those that find it most difficult to issue CLOs in the future.
“A lot of managers have said for a long time that they were in a good position for a sell-off,” said NYL Investors’ Chris Saltaformaggio at IMN’s virtual ABS East event last month. “Well, we saw a pretty significant one, and the decisions a manager made will be more scrutinised.”
Newcomers are also expected to face questions over their viability. “For new entrants, there’s an added level of scrutiny in terms of experience and tenor,” said Sonal Patel, managing director at Ocorian, speaking at the same conference. “It’s going to be difficult for managers that do not have much experience to be a repeat issuer.”
Five new managers printed a 2.0 CLO for the first time on each continent in 2020. AB, Gulf Stream, New Mountain, Pimco and Silver Rock brought their first CLOs of the 2.0 era backed by broadly syndicated loans in the US in 2020, while in Europe AlbaCore, BlueBay, Bridgepoint, CBAM and Palmer Square all arrived as first-time issuers.
2020 saw the fastest pace of US M&A activity since the 2008 financial crisis. Crestline Denali exited the business, selling its CLO contracts to Ares Management prior to the market sell-off in March, while Garrison Capital sold its CLOs to Anchorage Capital and Mount Logan Capital over the course of Q2 and Q3. Los Angeles-based Ducenta Squared Asset Management bought the CLO management contract for a CLO managed by Tortoise Credit Strategies in April.
Morgan Stanley IM took on Assurant’s former CLO platform and bought a majority stake in Eaton Vance. And Pine Brook Capital Partners sold CLO manager WhiteStar Asset Management to Clearlake Capital Group.
Share this article:
“A lot of managers have said for a long time they were in a good position for a sell-off”
Chris Saltaformaggio
, Senior director | NYL Investors
Global credit funds & CLO's
January 2021
| Issue 230
Published in London & New York.
Copyright Creditflux. All rights reserved. Check our Privacy Policy and our Terms of Use.