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CLO roundup: Supply picks up as Europe heads for record month

The new-issue market kicked back into action last week, with six new deals pricing globally. While IMN’s ABS East conference in Miami over the next couple of days should curtail U.S. supply until later in the week, Europe is expecting a trio of pricings any time now.

Global volume in the year-to-date stands at $101.54 billion, according to LCD.

Of this, $89.86 billion comes from U.S. issuance of 166 deals, with another five CLOs pricing last week totaling just over $3 billion. Issuance in the same period last year stood at $56.74 billion from 117 deals.

LCD subscribers can click here for full story, analysis, and the following charts:

  • Deal pipeline
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume

– Sarah Husband

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Despite CLO boom, structured finance share of leverage loan mart eases

outstandings CLO vs loanIn a year when CLO issuance is booming and retail flows are negative, it’s surprising to note that the share of outstanding institutional loans held by structured-finance vehicles actually has declined, easing to 43.4% (as of Sept. 11), from 44.8% at the end of 2013. By dollar amount, that’s $343.1 billion (according to Wells Fargo CDO analyst David Preston) of the $790.1 billion in the S&P/LSTA Index.

This analysis is part of a longer LCD News story that also details CLO issuance, as a share of LSTA Index leveraged outstandings, structured finance outstandings – CLO 1.0 vs. 2.0 – and near-term possibilities regarding CLOs that will be called.

For more on how the CLO market works check out LCD’s online Loan Market Primer. It’s free, of course.

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Europe: Quirolo joins Cadwalader, Wickersham & Taft as a partner

cadwalader David Quirolo has joined CadwaladerWickersham & Taft as a partner in the Global Capital Markets Practice Group, in the firm’s London office. Quirolo joins from Ashurst, where he was a partner.

His practice focuses primarily on CLOs and other securitization and repackaging transactions involving various asset types, and advises arrangers and collateral managers as well as issuers, managers, originators, and investors in a variety of structured finance transactions, both in the U.S. and Europe.

Prior to joining Ashurst, Quirolo spent eight years in Cadwalader’s New York and London offices. – Sarah Husband

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CLO roundup: September gets off to slow start in both US, Europe

It’s been a tentative post-summer return for the CLO market with just three new issue CLOs pricing so far in the U.S. this month, and the Dryden XXVII tap providing Europe’s only new issue activity to date. Still, a number of transactions are expected to price this week, ahead of the IMN’s ABS East Conference in Miami next week (Sept. 21-23).

Global CLO issuance in 2014 stands at $97.71 billion, according to LCD.

LCD subscribers can click here for full story, analysis, and the following charts:

  • Deal pipeline
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume


– Sarah Husband

 

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Brigade Capital prices $461.1M CLO via Citi; AAA DMs at 152 bps

Citi has priced a $461.1 million CLO for Brigade Capital Management, according to market sources. The transaction was upsized from $409.75 million.

The transaction is structured as follows:

The non-call period ends on Oct. 17, 2016, the reinvestment period on Oct. 17, 2018 and the stated maturity is Oct. 17, 2026.

This is Brigade’s sixth CLO to price. It priced its most recent deal prior to this, a $416.5 million CLO, via BAML in March. Brigade has $16.5 billion in assets under management.

Including Brigade’s deal, issuance in the year to date rises to $85.88 billion from 159 deals. This is the second deal to price in September for $830 million, according to LCD. – Sarah Husband

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CLO roundup: Pipelines point to busy year-end for both US, Europe

After a busy summer, with both the U.S. and European CLO markets churning out new transactions in August, there is every indication that CLO issuance will remain strong all the way through to year-end.

Global CLO issuance in 2014 has now risen to $96.64 billion, according to LCD.

The U.S. remains the main driver of this total, printing $10.68 billion of volume from 20 deals in August, versus $13.39 billion from 23 deals in July and $13.78 billion in June, according to LCD. Note that refinancings are not included in these numbers.

LCD subscribers, please click here for full story, analysis and the following charts:

  • Global CLO volume (Jun 13-Sep 5)
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume
  • Deal pipeline

– Sarah Husband

 

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Leveraged loans: US CLO volume tops 2013 total as pipelines remain strong

CLO chart 1 2014-09-03(2)

The U.S. CLO market kept on printing new deals through the month of August, helping push this year’s total volume past that recorded for the whole of 2013 and ever closer to the record high of $97.01 billion recorded in 2006.

At $85.42 billion from 158 deals in the year to date, according to LCD, U.S. CLO supply has easily surpassed the $82.61 billion notched from last year and is closing in on the $88.94 billion issued in 2007. – Sarah Husband

For more CLO news and market talk follow Sarah on Twitter: @husbandLCD

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Leveraged loan market observations, California edition: Demand, bubbles, record CLOs

On my annual August West Coast swing I was privileged to have many informative discussions with our friends on the buy-side — including at Los Angeles’ Chavez Ravine, while watching Clayton Kershaw lead the Dodgers to a win over the Angles. What follows is a summary of the insights I was able to glean, which I pass along with as little editorializing as possible.

The buy-side is in the drivers seat
Clearly, managers have adjusted to today’s new normal, in which they are able to control pricing discussions. The reasons are well known. To summarize: Hot money is out of the asset class, for now. Retail flows are negative. High yield accounts are selling. And institutional investors have pulled in their horns for the same reason as have retail investors – a combination of bad press, duration fatigue and the overall risk-off posture of the market.

Bubble trouble?
There’s a broad consensus that terms and conditions are stretched, and debt multiples are pushing into an uncomfortable zone. Will there be another default spike in the years to come, as a result? Of course. Credit cycles have existed since the ancient Sumer civilization supposedly invented debt 3,500 years before Christ.

Given the solid economic outlook, however, an organic catalyst seems like a remote possibility in the near term. That does not dismiss an exogenous shock that sinks the global economy into recession (there are plenty of flash points around today to make such a risk more than idle). But even in that case most issuers can eat out of their own refrigerator, at least for a time, as a result of wide coverage ratios.

Underwriting calendar/CLO warehouses
One big way managers observe that the current period is far different than 2007 is a lack of overhang. Naturally, there is a wide array of CLO warehousing, but warehouse lines are far less vulnerable — from a bank’s perspective — because of large first-loss positions required of equity investors. As well, the underwriting calendar today of roughly $40 billion in M&A loans is a fraction of the roughly $350 billion that loomed over the market – and banks’ liquidity – when the fecal matter hit the rotor device in 2007.

CLOs
A record year of $100 billion is in the book already, managers say, based on the year-to-Aug. 11  total of roughly $79 billion. The number could go a lot higher — perhaps upwards of $125 billion — given managers’ ability to source sub-par paper in the secondary, and the decent flow of new-issue on tap.

Retail flow
This will remain mostly negative until there’s some meaningful pick-up in rates. That said, 2015 could be a huge year for inflows if the Fed does, as expected, finally start raising rates.

Institutional mandates
Pension funds and other institutional investors have put the brakes on credit, and what mandates are in process are of the “go-anywhere” variety, that allows managers’ discretion to invest across products and regions.

To sum it up, I’d say for CLO managers these seem to be the best of times. They would not like to see further deterioration that would scare equity investors from the field. But the current state of play is highly conducive to ramping and printing deals (as the volume numbers attest). As for retail managers and those hunting for institutional mandates, it is not the worst of times, by a long shot. But it could be better.

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CLO roundup: US/Europe see second busiest week, pricing nine CLOs

The CLO markets have definitely not gone fishin’ this month. Last week was the second busiest week of the year globally, with $5.11 billion of volume across nine new CLO transactions. The U.S. priced seven deals, and Europe churned out two more, leaving global volume at $89.86 billion in the year to date, according to LCD. The busiest week globally this year is the week ended June 6, when $7.2 billion of new CLO transactions priced.

Players do not expect more deals to price out of Europe this month. But activity is likely to resume quickly in September, with Carlyle and 3i expected to be among the first out of the blocks, according to market sources. With 15 managers and more working on new deals, the autumn market could be crowded, so managers will want to ensure decent air time among investors by getting deals out promptly.

LCD subscribers can click here for full story, analysis, and the following charts:

  • US Deal pipeline
  • European arbitrage CLO issuance and institutional loan volume
  • European Deal pipeline

– Sarah Husband

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Oaktree prices $703.35M CLO via Mitsubishi UFJ Securities

Mitsubishi UFJ Securities has priced a $703.35 million CLO for Oaktree Capital Management, according to market sources. The cash-flow transaction, Oaktree EIF II Series A1, was upsized from $655 million.

The deal is structured as follows:

Of note, the transaction includes a ¥37.042 billion special purpose entity – Repackaged CLO Series OT-A1 – which will function as a balance guarantee currency swap in connection with a portion of the senior notes, according to the S&P presale. The AAA-rated SPE will issue Japanese yen-denominated notes, and is backed by the dollar-denominated notes issued by the CLO. Mitsubishi UFJ Securities has arranged this SPE.

The CLO will have a two-year non-call period, a four-year reinvestment period, and the final maturity is Aug. 15, 2025.

It includes a springing bond bucket and a 65% cov-lite bucket, according to the S&P presale.

This latest pricing takes the number of U.S. CLOs managed by Oaktree to five. The manager priced a $516.5 million CLO in January via Citi, and its debut European CLO via Barclays in May.

Including Oaktree’s deal, issuance in the year to date rises to $78.5 billion from 144 deals, while seven deals have priced in August for $4.14 billion. – Sarah Husband