It’s official: we need more people working in CLOs

Investors in Blackstone CLOs were informed of trustee report processing delays in mid-May. An 18 May notice to Marino Park CLO investors stated: “The issuer hereby gives notice that the collateral manager has informed it that the collateral administrator has delayed and may continue to delay the production and publication of certain of the reports beyond the designated reporting date.”

At Creditflux’s CLO Symposium last month, Nuveen’s head of structured credit Himani Trivedi addressed the delay in CLO reporting across the industry, pointing out that progress on the issue will be slow. “It takes a bit of time for the new team to take on the role and understand the documentation,” she said.

The lag in report publication has been ill-timed for CLO investors. As loan prices drop (the S&P/LSTA US Leveraged Loan Index dipped below 96 points in May) portfolio monitoring has become an increasingly important part of risk management.

“If you’re looking at lower CLO mezzanine and equity tranches, the delayed trustee reports can hurt your liquidity because it’s tough to decide when to sell or buy,” says a New York-based CLO investor. “If I’m looking at something that’s delayed in terms of filing, I’ll probably pass it.”

Another CLO investor tells Creditflux that delayed CLO reports have been an impediment to rating agencies. “If rating agencies don’t receive the data, they can’t monitor the deals and there’s a possibility they could downgrade tranches.”

It is unlikely the situation will escalate to this level, sources say. CLO managers and investors have had various discussions to overcome the issue, including the possibility of managers sending raw data to investors and agencies.

A spokesperson for US Bank declined to comment on the delays. The firm has consistently been voted top by market participants in Creditflux’s annual CLO Census.

In the CLO trustee category for the firm which “provides the clearest, most timely and accurate reporting” it won 58% of the vote in 2021, followed by BNY Mellon (14.6%) and Citi/Virtus (10.1%).