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Analysis CLOs
Full steam ahead in the US and Europe
by Tom Davidson
We’re now six months into 2024, and according to our latest league tables, the CLO engine shows no sign of slowing down, as spreads grind tighter and resets get underway in Europe
Fears that global issuance would tail off in the second quarter have been well and truly quashed. Our league tables for the first six months of 2024 showed total global of issuance of just under USD 240bn. What’s even more impressive is how consistent the flow of primary deals is looking from month to month, suggesting that rumours of the CLO engine running at full capacity may not be far from the mark.
The demand from managers and investors for deals (especially for resets and refis) is opening up the market to new bankers, but the top players remain unchallenged. The top five US BSL CLO arrangers for 1H24 were JP Morgan, BofA, Citi, Goldman Sachs and Morgan Stanley. That same quintet were top of our 2022 rankings.
Global CLO issuance ($bn)
All data as of 30 June 2024 Source: Creditflux
JP Morgan and BofA fight for top spot
The duel between JP Morgan and BofA seems to be turning in favour of JP Morgan, although BofA’s growing focus on middle market CLOs means the two banks are still neck and neck in terms of total US deal flow. JP Morgan arranged just under USD 27bn of CLOs in the first half of the year. Below the top two Citi increased its market share, while Morgan Stanley and Goldman Sachs both slipped a little. But that doesn’t suggest either is having a bad year. Both have already arranged 30% more CLOs this year than in the whole of 2023.
240
USD
bn
Total global CLO issuance in the first six months of 2024
Turning to US BSL CLO managers, Elmwood sneaked into top spot in the half thanks to relentless resets, with USD 7.5bn of total CLO volume. UBS (formerly known as CSAM) came in second. It has also focused on reworking old deals, especially via refinancings. An honourable mention goes to Blackstone, which came third overall, but was the largest issuer of new CLOs, tallying an impressive USD 3.7bn of new issues.
In Europe, Jefferies again retained its crown as the largest CLO arranger, with over EUR 6bn of issuance, and an increased market share of more than 19%. Below it, JP Morgan achieved a notable jump in position, moving from fourth place in 2023 to second now, with almost EUR 5bn of volume.
It is in our middle market rankings that the biggest changes are visible. Last year, the top two banks were Natixis and Wells Fargo. This year the top spots have been taken by Greensledge and SocGen. Greensledge is top after arranging USD 3.8bn of CLO issuance. New arrivals such as Scotia are also moving up the table.
New CLO AAA spreads (bps)
2024 US BSL CLO issuance
2024 European CLO issuance
2024 is a close second to 2021
With such strong numbers, talk has turned to comparisons with the record-breaking USD 547bn of global issuance in 2021. 2024 is not quite at that level. The first half of 2021 saw USD 283bn of CLOs price globally, leaving this year more than USD 40bn behind.
Looking ahead, market sentiment is mixed on whether records will fall, with headwinds from the loan market weighing down the new issue pipeline. But looking at the trends in senior spreads it’s clear that investor demand for CLO paper remains exceptionally high. According to CLO managers, this is being driven both by amortisation returning money to the pockets of existing investors, as well as increasing allocations from both retail money (via ETFs) and institutional investors.
7.6
USD
bn
Elmwood was the top US BSL CLO issuer thanks to relentless resets
As we wrote last month, Japanese life insurers and banks are a growing part of the landscape, competing for assets with CLO ETFs that are adding more than a billion dollars a month of triple A paper. US banks also remain key participants, although they seem to be holding steady rather than increasing investments.
As can be seen in the chart opposite, that demand has driven spreads down. Triple A spreads in the US and Europe have moved in from an average of almost 200bps at the start of the year to below 140bps now. As this issue goes to press, the latest triple A benchmarks for broadly syndicated CLOs stand at 135bps in the US and 130bps in Europe.
Methodology
All data used for these rankings is as of 30 June 2024. Issuance totals exclude double counting due to jointly-arranged deals. In jointly arranged deals, credit is split between the lead and co-arranger. For queries and corrections please contact data@creditflux.com.
