January 2022 | Issue 241
Past returns
KKR’s unusual CLO liquidation
Five years ago in Creditflux, we reported that junior debt investors in a KKR-managed European CLO voted to alter the deal’s documentation so they could drive a liquidation of the legacy deal, such that they would receive roughly 92% of par.
The prospects were not especially high for class E noteholders in Avoca III, with the deal having exposure to several defaulted assets and long-dated loans. And although equity investors typically control the liquidation rights behind a CLO, this did not appear to be the case for Avoca III.
The change in documentation stipulated that, despite the class Es not being redeemed at par, this would not constitute an event of default.
Points up front
Correlation between CDS and mixed martial arts
BNP Paribas clinched a big-name hire to its credit derivatives division in New York last month after poaching managing director Patrick Vickers from Credit Suisse.
Vickers boasts a 20-year-plus career in CDS trading, but he’s also accustomed to trading blows through a short-lived career in mixed martial arts (MMA).
Between 2010 and 2011 Vickers contested six MMA bouts, winning three and losing three. During that phase he doubled as a single-name CDS trader at Goldman Sachs.
Given his experiences, there might be no one better placed to grapple with the current bout of CDS volatility. Especially as fluctuating CDS spreads seem to have come full circle in the past few weeks — rather like a spinning back-fist.
Strike price: CDX HY at 300bp might be a popular strike, but so is a right hook
Diverse? More like reverse
Diverse leadership structures at asset management firms are known to attract institutional investors. But we hear that one CLO manager has taken advantage of this by presenting itself as a diverse organisation. A look through the pitchbook paints an entirely different picture though.
Green-washing has worked its way into investing parlance in recent years as investors see through claims a firm is environmentally friendly. Perhaps diversity-washing should be investigated with the same rigour.
“The tone may have been too positive”
Pearl Diver Capital partner Matt Layton tells Creditflux that CLO market participants may have been overly bullish after the emergence of the omicron variant sent credit spreads shooting out.
Global credit funds & CLO's
January 2022 | Issue 241
Published in London & New York.
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