March 2020 | Issue 221
Past returns
Seven-year wait for equity payment
Five years ago we reported that equity investors in three legacy PGIM CLOs received a total of €1.1 million in distributions — seven years late. Trustee Deutsche Bank cited “an operational issue on the part of the collateral administrator”.
The genesis of managed CSOs
Also five years ago, we reported that managed CSOs were being discussed for the first time since the financial crisis. The 2.0 CSO market grew to $65 billion of issuance in 2019. Five-year CSOs now fuel hopes that a managed deal could be less than a month away (see page 5).
Points up front
Betting on ESG CLOs
Investing ethically is becoming a big part of credit, with CLO managers among the first to adopt environmental, social and governance (ESG) investment guidelines. So it’s no surprise that ESG criteria were high on the list of talking points at the Structured Finance Association’s SFVegas gathering last month. At the event, CLO market practitioners debated what constitutes ESG and the merits of positive screening over negative screening (see page 8). But it’s ironic that this particular deliberation took place at a casino. Maybe the debate CLO issuers should have been having is whether the Vegas roadshow could be filed as a CLO marketing expense in the pursuit of an ESG-compliant CLO.
Aria Resort & Casino: Las Vegas hotel hosted debate on ESG and, possibly, a variety of non-ESG compliant activities
Credit picking follows on from investor picking
Credit picking skills will be important this year amid heightened idiosyncratic risk, so everyone seems to say. But Ares Management, one of the biggest names in direct lending, has demonstrated that asset managers can also be picky with the mandates they take on, when the firm walked away from a private debt mandate with London CIV in January. The Los Angeles-headquartered firm can afford to be choosy: it won a $750 million private debt mandate from Tennessee Consolidated Retirement Systems two weeks later.
“How about a carbon reduction covenant?”
In a social media post, Bfinance’s Trevor Castledine recalls a conversation with a private debt manager who claimed to be powerless when it comes to influencing borrowers over ESG. The lender’s response was: “Er…”
Global credit funds & CLO's
March 2020
| Issue 221
Published in London & New York.
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