Opinion

July 2020 | Issue 225

Randy Schwimmer,

Head of capital markets and origination

Churchill Asset Management

Opinion

Direct Lending

Investors take comfort from an active secondary market, but liquidity can be a mixed blessing

Thomas Majewski,

Founder & managing partner

Eagle Point Credit Management

Opinion CLOs

It takes just a few CLO collateral managers selling into the distressed community to start cracks forming

2020 is a massive opportunity for change — and clinging to past achievements won’t wash

Tanvi Gupta

, Head of data journalism &

Sayed Kadiri,

Editor

Opinion Black Lives Matter

If you’re not finding black talent, you’re not trying hard enough

Past returns

GoldenTree CLO trades over par

Five years ago we reported that the equity in a GoldenTree 1.0 CLO was in demand, despite the threat that its position could be marked down to zero.

$13.5 million of the first loss notes in GoldenTree Loan Opportunities IV covered at 103.1. The 2007 US CLO had an ‘amendment buy-out option’, which gave GoldenTree the right to buy the equity at zero if the IRR went above 17%. The CLO surpassed 17% in August 2013, but we reported that GoldenTree was unlikely to exercise its option.

The CLO was liquidated in January 2017, at which point its equity IRR had lifted to 22.96%. It had a high management fee of 75 basis points, but did not feature an incentive fee.

Points up front

Channelling Twain, Agent Smith and Mike Tyson

Lockdown can adversely affect one’s grasp of reality, and for credit portfolio managers this has manifested itself in a penchant for quoting famous (sometimes fictional) figures.

SkyBridge’s Anthony Scaramucci cited Mark Twain in a June investor letter: “History doesn’t repeat itself, but it often rhymes.” Algebris’s Alberto Gallo took inspiration from Agent Smith (The Matrix): “There is another organism on this planet that follows the same pattern. Do you know what it is? A virus.”

But our favourite comes from a US CLO trader taking aim at fund managers a la Mike Tyson: “Everyone’s got a plan until they’re punched in the mouth.”

We think it's a knock-out line.

‘Iron’ Mike: knocking out Larry Holmes was a warm up for taking on fund managers

I’m terribly sorry, I didn’t quite catch that…

Creditflux has been running a series of webinars on CLOs and private credit, and despite the risk of unreliable technology, these have been held with few wifi-related issues.

Last month during the Creditflux West web panel, BNP Paribas global CLO head Adnan Zuberi’s internet connection gave way for a few seconds. When he returned he was faced with the question, what is the demand for primary CLO equity?

Without hesitation, he quipped: “If I get cut off again it’s because my bank doesn’t want me to answer the question.”

THEY SAID IT

“Can I be a bond investor and invest in Netflix?”

The response of a loan portfolio manager after we asked where should loan investors park their cash?

CLOs at a glance

Investors take comfort from an active secondary market, but liquidity can be a mixed blessing

Browse more Creditflux newsletters

Global credit funds & CLO's

July 2020

| Issue 225

Published in London & New York.