Opinion

February 2020

Issue 220

Thomas Majewski

Founder & managing partner

Eagle Point Credit Management

Opinion

CLOs

Don’t be tempted by low debt costs — the key driver of performance in static CLOs is market timing

Putri Pascualy

Managing Director, senior credit strategist & PM

Paamco Prisma

Opinion

credit

You need a balanced portfolio that’s ready for calculated risk taking — so consider a barbell approach

Duncan Sankey,

Portfolio director and head of credit research | Cheyne Capital

Opinion

leveraged loans

New accounting rules could be the axe that decapitates zombie credits

2020 will be about relative value, watching for idiosyncratic risk and a good deal of running away

Mohammed Kazmi,

Portfolio manager and macro strategist | Union Bancaire Privée

Opinion

derivatives

It’s imperative to remain in liquid assets and this makes CDS indices attractive

Past returns

Would-be CLO buyers turn sellers

Five years ago in Creditflux, we reported that the new generation of US 2.0 CLO managers were striving to grow their CLO AUM through manager acquisitions; namely, Benefit Street Partners and Triumph Capital Advisors, the pair having issued their debut CLOs in 2012 and 2014, respectively.

However, they ended up becoming acquisition targets themselves. In October 2018, Benefit Street was bought by Franklin Templeton, and Triumph was bought by Pine Brook in March 2017 and renamed WhiteStar Asset Management.

WhiteStar did come good on its promise of buying a CLO business though, having won the auction for Doral Asset Management’s three CLOs in 2015.

Points up front

Swiss CLO manager is regular as clockwork

The Swiss are known for their meticulous timekeeping and punctuality, so it’s perhaps no surprise that an asset manager based in Zug is crafting a reputation as the most efficient in the CLO market.

Partners Group has left it precisely seven months between its last four European CLOs. It kept the streak going last month following the issuance of Penta CLO 7 on 28 January on the back of Penta 6 on 28 June.

Given Partners’ run of seven-months between deals, we can’t help but feel it should drop the Penta branding and call itself Hepta. Regardless, the CLOs will no doubt be repriced with precision timing as soon as their non call periods lapse.

Penta 8 is seven months away. Set your watch by it

“Thanks for the loan.” “What loan?”

Direct lending sounds simple enough; borrowers have direct engagement with a small set of lenders and negotiate a private agreement for the long-haul. Sounds easy enough, except when the lender claims to have no idea about the deal you’ve just announced.

This fate befell Nigerian oil operator Lekoil last month when it disclosed that the Qatar Investment Authority had extended a $184 million loan. It emerged that Lekoil had been duped by intermediaries claiming to represent QIA and it is having to scramble to secure funding.

Lesson learned: direct lending works best when it really is direct.

THEY SAID IT

“Ticking time bombs”

In the article “We need to talk about high triple C/bond-heavy CLOs”, we asked the CLO market for consistency in how we describe triple C-heavy CLOs. One anonymous poster didn’t hold back. (We ended up selecting triple C-flex CLOs.)

CLOs at a glance

Don’t be tempted by low debt costs — the key driver of performance in static CLOs is market timing

Browse more Creditflux newsletters

Global credit funds & CLO's

February 2020

| Issue 220

Published in London & New York.

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