Apollo’s Galowski moves to London as co-head of structured credit

Apollo’s Jim Galowski has relocated to London as co-head of structured credit.

Currently a senior portfolio manager in the firm’s corporate structured credit division, Galowski will look to develop the firm’s global structured credit business.

Prior to joining Apollo in 2012, Galowski was a partner at Stone Tower Capital, responsible for overseeing its investment activities in structured credit. Previously, he had worked at WestLB since 1990 in New York, London, and Singapore, and prior to WestLB he was with CIBC. — Sarah Husband

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Seix Advisors hires Wu from CIFC to expand CLO business

Seix Investment Advisors has announced the hiring of John Wu as managing director of structured capital markets. Wu will primarily be responsible for the expansion of the firm’s CLO business.

Wu was previously the co-head of structured products, a senior portfolio manager, and managing director overseeing 15 CLO new issue/refinancing transactions at CIFC.

Prior to CIFC, he was the head of CLO structuring at UBS and director in global credit trading at Deutsche Bank. He began his career in the Credit Derivatives group at Goldman Sachs. – Staff reports


BAML prices $513.5M Apidos XXII CLO, CVC’s third deal of year

Bank of America Merrill Lynch priced a $513.5 million Apidos XXII CLO managed by CVC Credit Partners last week, according to market sources.

The transactions details are as follows:

This deal represents the third from the investment manager. Apidos XXI priced in mid-May and Apidox XX priced in January.

The non-call period ends in three years on Oct. 20, 2018 and the reinvestment period in five years on Oct. 20, 2020. The final maturity of the deal is in 12 years on Oct. 20, 2027.

The Apidos XXII CLO brings the year’s issuance volume to 142 deals totaling $75.48 billion. Six new deals have now been issued in September for a total of $2.76 billion. – Andrew Park

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Battle heats up over management fees from TICC Capital

A fight is heating up over lucrative management fees from TICC Capital.

TICC Capital is a business development company that invests in debt through syndicated bank loans and debt and equity of CLOs. It is managed by TICC Management, which collects a 2% base fee annually, as well as an incentive fee. As of June 30, $5.3 million was due to TICC Management in advisory fees for the quarter, in line with the fee for the same quarter a year earlier.

In early August, TICC Capital announced an affiliate of Benefit Street Partners would acquire TICC Management. Benefit Street Partners is the credit investment arm of Providence Equity Partners. UBS Investment Bank advised TICC Management on the transaction.

Soon after, NexPoint Advisors submitted a proposal to the board of TICC Capital for a management agreement that would cut advisory fees by an estimated $35 million and include a $10 million investment in TICC Capital shares. NexPoint later sweetened its offer. NexPoint is an affiliate of Highland Capital Management.

Benefit Street Partners followed up with a revised offer, saying the base fee would be cut to 1.5% annually, from 2%, permanently. The offer would include an investment in TICC Capital of at least $20 million through common stock purchases over the next year. Benefit Street Partners would transition TICC Capital’s strategy to private debt investments.

A special committee for TICC Capital’s board of directors unanimously supported the new agreement with Benefit Street, a Sept. 3 statement said.

Now, a new party has entered the fray.

TPG Specialty Lending unveiled a stock-for-stock bid for TICC Capital Corp., saying the offer was superior to the competing proposals from Benefit Street Partners and NexPoint.

Under terms of the offer, released today, TICC stockholders would receive common stock of TPG Specialty Lending equivalent to $7.50 in value, or a 20% premium to TICC Capital’s Sept. 15, 2015, closing stock price. TPG Specialty Lending shares, which trade on NYSE under the ticker symbol TSLX, eased $0.12 today, to $17.23, while the broader market indices were higher.

TPG Specialty Lending publicized its offer today, after proposing the offer privately to the special committee of TICC Capital’s board. TPG Specialty Lending added that the TICC special committee had rejected the offer.

But TPG Specialty Lending has urged the board to reconsider, arguing the transaction would result in long-term value for both shares, in addition to the immediate premium for TICC stockholders.

“TSLX remains fully committed to pursuing this transaction for the benefit of all stockholders and urges the special committee to enter into constructive discussions with TSLX pursuant to its fiduciary duties,” TPG Specialty Lending said in a statement today.

At a special meeting of TICC shareholders on Oct. 27, TPG Specialty Lending said it intends to solicit support to block the Benefit Street Partners’ proposal.

“We agree with NexPoint that stockholders should reject the Benefit Street Partners proposal. However, the NexPoint proposal is equally flawed as both transactions provide returns only for external managers and offer no immediate value to stockholders,” TPG Specialty Lending said in a statement.

Shares in TICC Capital closed higher today, at $6.87, up nearly 10%, in firmer market conditions. Still, they are trading at a discount to net asset value, which was $8.60 per share as of June 30. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.


Natixis hires CLO banker Alex Zilberman from Credit Suisse

Natixis today announced the hiring of Alex Zilberman as co-head of U.S. CLO and Structured Credit within its Global Structured Credit and Solutions (GSCS) group. Zilberman would manage the team alongside Michael Hopson. Both Zilberman and Hopson will report to Hank Sandlass, the deputy head of GSCS.

Zilberman was previously at Credit Suisse in a number of roles involving CLO origination, advisory, and structured credit sales. – Andrew Park

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Loan bids post fourth consecutive drop amid outflows, slowing CLO issuance

The average bid of LCD’s flow-name composite fell 11 bps in today’s reading to 98.78% of par, from 98.89 on Tuesday, Aug. 11.

Among the 15 names in the sample, eight declined, three advanced, and four were unchanged from the prior reading. Avaya’s B-7 term loan due 2020 (L+525, 1% floor) was once again the biggest mover in either direction, falling another point in today’s reading to an 88.5 bid, extending losses on its 3Q results released last week amid the volatile market conditions.

After losses deepened Wednesday morning, loans began clawing back losses yesterday afternoon, with the recovery continuing today, as some buyers stepped in to capitalize on the recent weakness.

Overall, the market has had a slightly negative bias in recent sessions with loan mutual funds recording outflows and CLO issuance slowing, while traders also say that some high-yield and crossover accounts have been selling loans amid the recent downdraft in high-yield. Lipper last week reported an outflow of $594 million, the largest in 26 weeks, and the market appears poised for an even more considerable outflow this week. LCD data project an outflow, per the Lipper sample of weekly reporters, of $775 million for the five days ended Aug. 12.

With prices well off recent highs – the percentage of performing Index loans bid at par or higher fell to 23.1% as of yesterday’s close, from 40.6% a week earlier and 54% three weeks ago – some accounts are viewing the recent weakness as a buying opportunity, and there’s speculation that today’s relative bargains could revive the lackluster CLO issuance as of late. Regardless, buyers began coming out of the woodwork.

Nevertheless, this recent secondary weakness has bled into the primary market. While there’s ample demand to get deals done, issuers and arrangers can’t be as aggressive as they might have been a week ago, especially with a few recently issued deals that cleared tight relative to their ratings profiles bid below their issue prices, such as Pharmaceutical Product Development and HD Supply.

With the average loan bid tumbling 11 bps, the average spread to maturity gained two basis points, to L+415.

By ratings, here’s how bids and the discounted spreads stand:

  • 99.63/L+367 to a four-year call for the nine flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+365.
  • 97.52/L+499 for the six loans rated B or lower by one of the agencies; STM in this category is L+474.

Loans vs. bonds
The average bid of LCD’s flow-name high-yield bonds dropped 40 bps, to 97.47% of par, yielding 7.48%, from 97.87 on Aug 11. The gap between the bond yield and discounted loan yield to maturity stands at 327 bps. – Staff reports

To-date numbers

  • August: The average flow-name loan fell 87 bps from the final July reading of 99.65.
  • Year to date: The average flow-name loan rose 186 bps from the final 2014 reading of 96.92.

Loan data

  • Bids decrease: The average bid of the 15 flow names slipped 11 bps, to 98.78% of par.
  • Bid/ask spread expand: The average bid/ask spread grew, to 38 bps.
  • Spreads higher: The average spread to maturity – based on axe levels and stated amortization schedules – inched up two basis points, to L+415.

CLO roundup: US prints two deals, Europe closes on first refinancing

global CLO issuance

Just two new-issue transactions priced globally last week amid the August slowdown, with chatter in Europe saying two managers have already opted to delay pricing transactions until September, when the market is fully staffed again. Global issuance edged up to $77.86 billion, according to LCD. – Sarah Husband

Year-to-date statistics through July 31 are as follows:

  • Global issuance is $77.86 billion.
  • U.S. issuance is $67.21 billion from 126 deals, versus $79.54 billion from 146 deals during the same period last year.
  • European issuance is €9.58 billion from 24 deals, versus €7.7 billion from 18 deals during the same period last year.

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CLO Round-up: With SEC clarity re risk-retention (finally), an active week

global CLO volume

After a sluggish start to the month, it was an active week in the U.S., both in terms of new issues and on the regulatory front. Four U.S. new-issue transactions priced, while in Europe, AXA Investment Managers priced the third deal of the month, a €362.3 million transaction, via J.P. Morgan. Through Friday, July 24, global issuance rises to $73.67 billion.

The SEC provided much-awaited guidance that CLOs issued prior to Dec. 24, 2014 – the date the final risk-retention rule was published – will be able to refinance debt tranches under certain conditions after the rule takes effect in December 2016 without being subject to risk retention. The SEC’s position is reflected in a July 17 no-action letter in response to a request from Crescent Capital Group. It provides the market with clarity around the refinancing issue, which has been a topic of discussion since the final risk-retention rule was first published in October 2014. – Kerry Kantin/Isabell Witt

Year-to-date statistics, through July 24, are as follows:

  • Global issuance totals $73.67 billion
  • U.S. issuance totals $63.94 billion from 120 deals, versus $71.11 billion from 133 deals during the same period last year
  • European issuance totals €8.75 billion from 22 deals, versus €6.92 billion from 16 deals during the same period last year


This analysis is taken from a longer LCD News story, available to subscribers here, that also details

  • Recently priced CLOs
  • CLO pipeline
  • US CLO volume/outstandings
  • European CLO volume/outstandings
  • European priced CLOs



Tikehau hires Goold for European CLO business

Alison Goold has joined Tikehau as a portfolio manager in its European CLO business. In this new position, Goold will report to Debra Anderson, head of the CLO department.

Goold joins from BNP Paribas, where she had been a director in the leveraged syndications team. Previously she had been head of corporate credit and a portfolio manager at AgFe, an independent advisory and asset management firm, and before that was a managing partner at mezzanine fund manager Carta Capital.

Tikehau recently priced its debut €354.7 million CLO through Goldman Sachs. – Nina Flitman


CLOs: A Volcker Rule primer ahead of tomorrow’s compliance date

Non-Volcker compliant AAA CLO paper has widened in the secondary market over the past couple of months ahead of a key deadline arriving tomorrow that prohibits U.S. broker-dealers from making markets in non-compliant paper.

Morgan Stanley CLO research analysts, Richard Hill and Mia Qian, in their June CLO Market Tracker research report, estimate that the basis to Volcker compliant CLOs is now more than 50 bps, which in their view, is due to diminished liquidity in this paper.

For those of you not yet fed up with hearing about Volcker and its impact on the CLO market, here is a run through the key points:

The Volcker Rule effectively prohibits U.S. banks from holding ownership interests in “covered funds,” and a CLO that includes bonds in its collateral pool, and which is issued under Rule 3c-7, is classed as a covered fund. Under Volcker, ownership includes “the right to participate in the selection or removal of an investment manager” of the covered fund, outside of an event of default.

To be clear, tomorrow’s deadline only restricts U.S. broker-dealers from making markets in non-compliant CLO paper. Via an extension granted by the Federal Reserve last December, banks are still able to hold non-compliant CLO paper on their books through July 21, 2016 (with an additional extension through July 21, 2017 expected). However, this extension applies only to non-compliant paper held by banks as of Dec. 31, 2013, and thus, as of tomorrow, banks are no longer expected to trade or make markets in non-compliant paper, which has constrained liquidity in recent months.

There is a market-making exception that allows bank trading desks to trade non-compliant CLOs, but the exception contains two large impediments which could limit its use, according to Wells Fargo. “First, the bank faces a firm-wide limit for Volcker exceptions of 3% of Tier 1 capital; the bank then must decide how much of that exception to allocate to the trading desk. Second, any non-Volcker compliant tranches incur dollar-for-dollar capital charges against the banks’ Tier 1 capital,” the firm noted.

In terms of market impact, Wells Fargo analyst David Preston summarized in his February 2015 CLO Desktop Regulatory Guide research report that the majority of all CLO 1.0 deals should be paid off by 2017, that most post-2014 CLOs are Volcker compliant (i.e. do not include bond buckets), and so it’s the 2012 and 2013 vintage CLOs that are the issue, of which there was roughly $130 billion outstanding as of February this year.

Since the final version of the Volcker Rule was released in December 2013, CLO managers and their investors have been busy amending existing transactions to remove bonds. Some have done this via painstaking amendment processes with their investors, while others have used the CLO refinancing route to remove bonds, with 14 of the 22 refinancing transactions pricing so far in 2015 removing bonds via the process, according to LCD.

Although most players do not expect any further regulatory relief – there is the wild card of the “Barr bill” is still outstanding. Congressman Andy Barr has sponsored two Volcker-related bills – H.R. 37, or the ‘Volcker bill,’ which passed to the Senate earlier this year, and which includes a provision that would allow banks until July 21, 2019, to divest non-compliant CLO holdings – and H.R.1841. This latter bill was introduced in March and, while reintroducing the Volcker extension, also seeks to amend Section 13 of the Bank Holding Company Act of 1956, known as the Volcker Rule, to allow CLOs to have ownership interests in a hedge fund or private equity fund.

Still, one man’s loss is another’s gain and for investors that are not particularly concerned about liquidity, Morgan Stanley’s Hill and Qian think non-Volcker compliant legacy CLO AAA paper presents an attractive investment opportunity, given the much wider spread levels and relatively short weighted average life. – Sarah Husband

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