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News
News in brief
CLOs ‘enjoy’ yet another crazy month
Strong CLO deal flow continued in October. The month came in as easily the busiest so far this year. A total of 142 CLOs priced in the US and Europe, according to our data, beating even May’s tally of 123 deals.
In the US BSL CLO market, resets continued to dominate, with 53 pricing over the month, along with 17 refinancings. But new issuance also picked up, adding 33 deals to the roster. The private credit side of the spectrum also had a strong month for new issuance, with 11 new MM CLOs pricing, along with four resets.
Until now, the US market has coped admirably with this year’s high deal flow, but sources point to some congestion building up, especially among law firms.
The relentless pace may also be one reason spreads have remained relatively range-bound despite high amortisations.
Things are starting to change though. At the all-important triple A level, top tier managers have managed to edge new issue spreads down a basis point or two from the summer’s 135bps floor. Market chatter is that this trend could continue, with some deals coming in below 130bps before the end of the year.
Europe was busy as well, adding 14 new CLOs, eight resets and a refinancing, a flurry of deals for the normally slower market. Just as in the US, senior spreads ground tighter, with a number of CLOs pricing triple As at what seems to be the new floor of 128bps.
Despite the looming holiday season, it looks like there will be no respite for exhausted market participants just yet. The number of warehouses open continues to grow and current talk is of around 90 CLOs actively marketing globally.
Benefit Street Partners achieves landmark $1bn BSL CLO deal
The market saw an uncommon creature this autumn: a BSL CLO of around a billion dollars issued by Benefit Street Partners.
Such mammoth transactions (this one cleared at USD 968m) are more typically the purview of the private credit segment of the market, where, while not frequent, billion-dollar CLOs barely raise an eyebrow. For the BSL sphere, deals half the size are the norm.
“This $1bn CLO was a landmark transaction and a huge milestone for our platform. It showcases the depth and breadth of investor demand this year for the CLO product in general, and for the BSP platform specifically,” said Vincent Pompliano, managing director and co-head of CLO platform at Benefit Street Partners.
Benefit Street was able to pull off the feat because it had both a new issue CLO and a reset deal in the works — and, crucially, investors willing to play in both. One Japanese investor took 100% of the triple As, while BSP procured the equity from existing investors and from third-party investors in another fund it manages.
The deal nearly doubled the size of a USD 500m CLO BSP had issued in 2019, which had exited its reinvestment period. The new CLO and the reset extend the investment period for another five-years. By doing one deal rather than two, the firm not only got bragging rights, but also saved costs, such as lawyer fees.
“Moving forward... we now have the experience to work with our equity partners who are eager to put capital to work in order to efficiently structure and execute these types of transactions,” said Pompliano.
Top stories on creditflux.com: new funds, new managers — and teams on the move
16 October
SMBC swoops in to swipe JPMorgan’s CLO leadership
In one of the most dramatic moves the CLO market has ever seen, SMBC Nikko hired three of the most senior members of JPMorgan’s CLO leadership team. SMBC also took a number of other long-term members of staff from the largest CLO arranger in the world.
Among others, JPMorgan lost Christine Ferris, global head of CLO primary (pictured); Anusha Joly, global head of CLO syndicate; and Mussie Tizazu, head of US CLO structuring
8 October
Ex-Accunia PM seeks to launch new CLO fund
Christian Grane, the former head of multi credit strategies at Danish credit specialist Accunia, is seeking to launch a CLO fund that invests in equity and mezzanine tranches.
9 October
John Kim resigns from CLO investor Panagram
Veteran CLO equity investor John Kim resigned from his role as CEO and CIO of Panagram Structured Asset Management. A month later he resurfaced with his team at newly launched credit manager Reckoner Capital.
11 October
Arcano steps up CLO management plans
Spain’s Arcano Partners has hired Tom Muoio, a senior banker at Santander.
18 October
CVC Credit raises funds for CLO captive equity fund
CVC Credit kickstarted fundraising for a new captive equity fund to support its CLO issuance in the US and Europe.
22 October
Nuveen and AGL among those plotting debut as European CLO managers
US-based firms Nuveen, AGL Credit Management and LCM Asset Management joined the host of firms planning to enter the European CLO market.
23 October
KKR launches strategy with private credit CLO deal
KKR moved to establish itself as a more prominent player in the private credit CLO market, with the pricing of KIMM CLO, the first of a new line of ‘programmatic’ middle market CLOs.
24 October
Obra Capital markets debut US BSL CLO
Obra Capital marketed and priced a deal that will be the US firm’s entry into the CLO management business. The deal was the second US CLO debut this year.
28 October
Oaktree raises EUR 84m to invest in European CLOs
Alternative asset manager Oaktree raised EUR 84m for its second fund that will invest in European CLOs, European CLO Capital Fund II.
28 October
Onex launches follow-on third-party CLO fund
After raising more than USD 500m, Onex Corporation launched a new third-party CLO fund, Onex Structured Credit Opportunities II. The fund follows on from a previous vehicle, which closed in May 2022.
29 October
New managers hustle to join buoyant CLO market in US and Europe
New entrants are joining the ranks of BSL CLO managers on both sides of the Atlantic, with Obra, Fortress and CIC all in the market in October, and Fortress and CIC subsequently pricing.
30 October
German commercial bank HCOB begins investing in CLOs
Hamburg Commercial Bank (HCOB), formerly known as HSH Nordbank, has begun buying CLO triple A tranches, part of a growing interest from German investors in the asset class.
Past returns
Optimistic despite losses
Five years ago we were talking about a Moody’s report suggesting that future US loan recovery rates would be lower than during the financial crisis. Moody’s loss given default assessment had forecast that loan recoveries would average 61% — much lower than the historical recovery of 71%.
Well, here we are. Average loan recoveries are indeed in the low 60s, if not lower. But the other half of that article remains true as well. That part said CLO managers and equity investors remained optimistic. The furious rate of CLO issuance, and raising of CLO equity funds, shows that optimism remains.
Points up front
Long recognised for Current success
Congratulations to Angie Long, who was made Nike Sport Business Executive of the Year by Women Leaders in Sports.
When she isn’t busy running Palmer Square Capital Management, one of the largest CLO managers in the world, Long is equally busy as co-owner and founder of Kansas City Current, a women’s soccer club. Long, who played soccer in college, founded the club four years ago with husband Chris Long and Brittany Mahomes, wife of NFL quarterback Patrick Mahomes.
KC Current has had almost as dramatic a year as the CLO market. The team has been on fire this season, setting a new National Women’s Soccer League (NWSL) single-season record with 54 goals. It is the favourite to win the NWSL Championship this year.
Long: running Palmer Square and leading women’s soccer club Kansas City Current
Going nowhere fast
This year’s ABS East in Miami provided a brief respite for CLO managers and investors from the onslaught of issuance this year.
Unlike previous issuance rushes, this time the apparatus of the CLO market seems to be coping with the deal flow. But few parts of the market are actually growing, thanks to record amortisation and deal calls.
“How’s it going?” said one manager over a cocktail. “I’ve been working my ass off just to stay flat. That’s how it’s going.”
