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News
News in brief
European double B spreads widen as loans and bonds sell off
After a strong start to the year, European double B spreads moved out during April in both the primary and secondary markets, although some managers were able to resist the turn better than others.
According to data from PSL, by 3 May double B spreads in secondary were 3bps wider month on month, contrasting with the rest of the stack, which moved tighter. European double A secondary spreads have moved in 12bps month on month, for example.
Double Bs attract a different, and more volatile, investor base than most of the stack. According to one investor, the recent sell-off in European loans and bonds may have been a driver for the widened differential between investment-grade tranches and the lower mezz.
Another market source pointed to comparatively more attractive offerings in the US. “If Europe gets a bit tight, the investors [in the mezz] may be primed to switch to dollars,” he said.
Those movements were reflected in the primary as well. While some deals that priced late in March or early in April, such as Fair Oaks’ Loan Funding V and Bridgepoint CLO VI, managed to hit DM levels of medium-high 600s for their double B tranches, those numbers later widened markedly.
When significant issuance resumed in the third week of April, the reset of Partners Group’s Penta 12 highlighted weakness in the mezz despite robust senior demand. The final DMs in the lower mezz landed well wide of early price talk, with the double Bs paying 725bps over Euribor, compared to expectations in the upper 600s.
UK changes to securitisation expected to have limited impact on CLOs
As Creditflux went to press, lawyers across the City of London were coming to grips with the meat of the UK’s new securitisation regime, the so-called Edinburgh Reforms, first announced by the UK government in December 2022 and scheduled to take effect from the beginning of November this year.
Final versions of the amendments, published at the end of April, mark the latest step in the ongoing process of replacing EU securitisation regulation with a UK-specific regime. Key to this is tasking the UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) with the responsibility for developing rules that cover a wide range of the current regulatory regime for securitisations.
Earlier analysis of the changes had suggested that the FCA and PRA might implement areas of reform previously identified by the UK treasury, potentially including certain provisions that relate to transferring the risk retainer where there is a change of CLO manager.
Nevertheless, while the profession is still digesting the implications of the changes, sources indicated there was unlikely to be much significant upheaval in the regulation of CLOs within the new framework.
According to analysis from legal firm Dechert, the major identified changes to the framework include placing a direct obligation on originators and sponsors to ensure that securitisation special purpose entities, or SSPEs, are not established in countries classed as high risk by the Financial Action Task Force.
Currently, no party is obligated to ensure this practice does not occur.
Alliance Bernstein grows alternatives business
AllianceBernstein continues to expand its alternatives business with the launch of a new BDC, as well as a further push into strategies such as energy transition, asset-based lending and opportunistic credit.
“It’s not one single opportunity. There’s a really attractive opportunity set across private markets today,” said Matthew Bass, head of private alternatives at AllianceBernstein.
AB’s alternatives’ platform is largely credit-oriented, Bass said, with a corporate direct lending strategy — also known as Private Credit Investors — that manages nearly USD 20bn.
“We have various vehicles that target different client segments, all getting exposure to the same underlying privately negotiated, directly-originated middle market loans,” Bass said. “Recently, we’re looking to fill some gaps in the platform, in markets like energy transition and private asset-based lending, to complement the corporate lending capabilities we have.”
Currently, the firm has three private funds and plans to launch a fourth vintage in 2024, along with an insurance dedicated fund. It is also in the process of launching an open-ended, public non-traded BDC, targeting USD 1bn of fundraising, according to recently filed SEC regulatory documents.
Bass wouldn’t comment on the new BDC. But he did describe the impact cyclical trends — such as continued higher interest rates — have had on business opportunities.
“We’re seeing really attractive opportunities in core direct lending, where we could benefit from higher base rates, better spreads, better document protection.”
Top stories on creditflux.com:
this month’s recap gets from LSTA to BDC via ETF and SRT
22 April 2024
Columbia Threadneedle returns to CLO primary
After sitting out 2023, Columbia Threadneedle returned to the US BSL CLO primary market with a new issue arranged by Jefferies. The deal comes soon after the manager partnered with a Jefferies-led consortium that will support CLO issuance.
Stanton Ray: Columbia Threadneedle’s head of US loan platform oversees its US CLO business and co-chairs the credit committee. He joined the firm in 2022.
1 April
Sean Griffin departs JP Morgan to take helm at LSTA
The LSTA named Sean Griffin as its new executive director, replacing Lee M Shaiman. Griffin had spent two decades at JP Morgan.
1 April
GoldenTree grows giant captive equity fund
GoldenTree closed on USD 1.3bn in commitments for its third captive CLO equity fund, in the largest iteration of its GoldenTree Loan Management programme.
2 April
Thirty years strong — S&P highlights CLO resilience
For readers feeling battered by relentless Altice coverage, S&P Global Ratings came out with a timely reminder that CLOs deal with distress exceptionally well.
3 April
The Last Tranche with JP Morgan’s Ferris: new managers should focus on equity
JP Morgan’s head of CLO primary talked about why she loves working with debut managers.
11 April
Obra launches pair of structured credit ETFs
Obra Capital joined the ETF market, announcing the listing of Obra Opportunistic Structured Products and Obra High Grade Structured Products.
12 April
Neuberger Berman prints second-ever lightly syndicated loans CLO
Neuberger Berman, working with BofA as arranger, priced Neuberger Berman Loan Advisers LaSalle Street Lending CLO II.
16 April
US CLOs receive boost as major name returns to single B
S&P Global Ratings upgraded The Michaels Companies, an arts and craft retailer, to B- from CCC+, citing “significant improvement” in operating margin.
17 April
Adams Street CLO is deal for single investor
ASP Summa, a billion-dollar middle market ‘CLO’ from Adams Street Partners, is an innovatively structured private deal designed to maximise the capital efficiency of insurance investments in private credit.
19 April
CSAM prices CLO 69
Credit Suisse Asset Management continued its rapid pace of new CLO issuance, pricing Madison Park Funding LXIX, a US BSL deal.
23 April
Antares hires CSAM managing director
Antares Capital hired Alexander Chan as a managing director and global head of product strategy and development.
25 April
AXA wins USD 400m for SRT strategy
Demand for risk transfer deals was confirmed by an announcement from AXA IM Alts that it had been awarded a mandate by the Arizona State Retirement System for its SRT strategy.
26 April
Palmer Square paves new ground with BSL BDC CLO
Palmer Square Capital priced the first business development company CLO with BSLs as collateral.
Past returns
Private credit finally takes off in Asia
Five years ago we reported on a growing trend as several asset managers outlined plans for growth in the Asian private credit space. We mentioned Allianz, Ostrum and KKR targeting various credit strategies in the region, from traditional private credit to asset-based lending and infrastructure debt.
That market is finally talking off. Back then there was a focus on pan-Asian funds, often based in Singapore. Now attention has shifted to include India and Australia, with recent funds from Pengana Capital Group, Investec Capital Services and Tor Investment Management.
Points up front
Wong wins out in metaphorical duel
Everyone in the CLO market knows about Serhan Secmen’s love of a good metaphor. Napier Park’s portfolio manager for its CLO investments strategy has coined many striking examples in the past, including one memorable keynote that likened putting together the perfect CLO equity portfolio to picking a football team.
But he met his match at the LTSA/DealCatalyst CLO conference this month. A fireside chat with Secmen saw Oak Hill Advisor’s Tommy Wong take it up a notch when he likened himself to a chubby squirrel burying nuts ready for the winter to come. We wonder if Secmen can top that at our CLO symposium in May?
Wong: nutty metaphor is our new favourite
WiCLO returns again and again
Last month saw our fifth celebration of women in CLOs, with the Raines Law Room in New York packed for an evening of cocktails, networking and mentorship.
Thanks again to all of our partners — Computershare, Dechert, Milbank, Morgan Lewis, Paul Hastings and PWC — who supported the initiative.
Our latest contribution to women in CLOs happened just too late for that event, but we’re very proud to welcome Lisa Lee to Creditflux as our new deputy editor. She will be hosting the London version of the event on 14 May.
