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January 2021 | Issue 230
Past returns
Barclays gambles and wins on Zohar
Five years ago in Creditflux, we reported how Barclays had made gains from its investment in the debt of Zohar CLO I, a deal which was filed into bankruptcy by manager Patriarch Partners a few months earlier.
A unit within Barclays’ structured credit division had sold $285 million of the CLO’s notes to Patriarch at 36 cents on the dollar — much higher than its purchase price. Following the 2008 financial crisis, Barclays is said to have made several similar trades
Later, Patriarch also filed its other two CLOs into bankruptcy and then stepped down as manager. These CLOs were unusual in extending debt to companies sponsored by Patriarch.
Points up front
Brushing up on CLOs
It’s that time of year when CLO analysts forecast 2021 CLO volumes. It’s a thankless task, but for Serhan Secmen, head of CLOs at Napier Park Global Capital, losing a wager with a US CLO structurer on CLO volumes in 2015 meant he had to create a work of art on a triathlon theme.
Secmen struggled for inspiration until the beginning of the pandemic when, after seeing a piece by an unknown artist, he picked up his brush and created the painting pictured above.
“I like using analogies a lot while I am speaking at conferences,” says Secmen, “and this is a form of symbolism. While I was using rather obvious symbols to represent the main theme, I took the liberty to hide less obvious symbols for the person who will one day feel joy when they find them.”
Maybe we’ve spent too much time poring over CLOs, but when we forensically analysed the painting we deduced that the buildings on the bridge share an uncanny resemblance to CLO tranches.
Art appreciation: the owner of Secmen’s masterpiece hopes it will increase in value
I couldn’t, I’m stuffed
At Creditflux’s CLO Investor Summit, NEPC’s Kevin Bliss coined the term “equity stuffing” to describe commingled funds that CLO managers raise to invest in their CLO equity.
He said this alludes to the fact that such funds are stuffed full of a manager’s equity. We’d like to add that the pressure is on these funds to put money to work —and if they don’t, they’re, well, stuffed.
“Be careful what you do — last warning”
In court filings, Highland Capital Management alleges that its founder and former chief executive James Dondero sent this ominous text message to its current CEO James Seery.
Global credit funds & CLO's
January 2021
| Issue 230
Published in London & New York.
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