CLO roundup: Another debut manager joins the U.S. party

After a slow start, the U.S. CLO market churned out another five deals last week totaling some $2.26 billion, thanks to a burst of activity late in the week. With no deals printing in Europe, global issuance stood at $78.40 billion through Friday, July 18.

Last week’s new-issue action included a print from yet another first-time manager, Steele Creek Investment Management. With this print, the number of first-time managers pricing deals this year grows to 11.

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

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

– Kerry Kantin/Sarah Husband


July 2014 European Leveraged Loan Market Analysis – Video, Slides

This is S&P Capital IQ’s monthly loan market update. In this post, we concentrate on the trends at work in the European leveraged loan market during 2014 so far, including an increase in M&A financing and some signs of heating in the market. We’ll also touch on the question of whether some slowdown is to be expected.



Out of the €45 billion of leveraged loan issuance so far this year, M&A-related deals contributed €25 billion, more than double what was raised in the first half of last year. This total was boosted by some jumbo corporate M&A deals, most recently  the cross-border financing for Jacobs Douwe Egberts. Among sponsor-backed buyouts, LCD tracked an increase in the number of asset sales by corporates and families, bringing some welcome debut borrowers to the loan market.


Institutional investors continued to show strong appetite for leveraged loans during the second-quarter, and heavy repayments on existing loans spurred them on. In fact repayments reached a record quarterly high of €16.6 billion, based on the S&P European Leveraged Loan Index, as the chart shows.


Adding to institutional demand, there was lively issuance of new-generation CLOs, particularly during June, including some new managers entering the 2.0 market, and sources say the pipeline for further CLO issuance in the second half of the year looks healthy.


Through much of the year so far, there has been relatively little complaint from buyside firms about leverage multiples, and indeed first-lien leverage is pretty much flat on last year at around 3.7 times EBITDA. But second-lien tranches are appearing more frequently, and this helped drive total leverage a little higher, to 4.9x. Some arrangers argue leverage is unlikely to spiral up and up because this would result in deals coming to market with low single-B ratings, these often being hard to shift in syndication.


Instead, the market is showing its aggression in other ways – particularly in the use of covenant-lite loans. €10 billion of cov-lite paper – a record – has been raised this year, meaning that roughly one in three euros sold to fund managers had no maintenance covenants. The ELLI Index now includes a 13% cov-lite portion, the highest in its history – although a long long way behind the U.S., where the trend started.


However, from the point of view of yields, Europe looks less aggressive than it did earlier in the year as this chart suggests. Behind the scenes, yields on domestic European deals were flat from the first quarter to the second. But in line with the weaker technical picture in the U.S. market, cross-border yields widened in recent months, dragging the average out too.

Looking ahead, some kind of summer slowdown is likely, but arrangers say they are pitching on some aggressively structured deals and will be looking out for signs of pushback among investors if terms get too heated.


The video is available here.

The URL for the video:

PDF slides of the video on Slideshare is available here.

URL for the slides:

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– Ruth McGavin


CLO roundup: Issuance continues with more to price in Europe, U.S.

Traditionally the third quarter tends to be the least active of the year for the CLO market. As yet, however, there is no sign that issuance is taking a break for the summer, with five new U.S. CLOs pricing and another four in the near-term pipeline. Europe is also not quite done, with several more managers said to be eyeing a print before the end of July. Global volume YTD stands at $76.13 billion, according to LCD.

Stateside, a comparison between this month’s issuance and last year neatly sums up the ongoing strength of this year’s new issue market. At $5.67 billion with two and a half weeks yet to go, July 2014 supply has put July 2013’s full month supply $3.37 billion in the shade.

At $66.64 billion from 124 deals, according to LCD, issuance to date is currently fourth in line to the title of largest annual tally ever behind 2006 ($97.01 billion), 2007 ($88.94 billion), and 2013 ($82.61 billion). By comparison, YTD issuance in 2013 was $43.69 for 89 deals.

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

  • Global CLO Volume
  • Deal Pipeline, US and Europe
  • European arbitrage CLO issuance and institutional loan volume

Sarah Husband


Europe: Chowdhary joins Pramerica’s European leveraged finance team

pramerica-logo-300Arvinder Chowdhary has joined Pramerica as a principal and portfolio manager for its European Leveraged Finance team, according to a company statement.

He will focus on European high-yield portfolios, and reports to Jonathan Butler, managing director and head of European Leveraged Finance.

Chowdhary most recently served as a research analyst/portfolio manager at Western Asset Management in London, working within European high yield. He was involved in managing the European high-yield assets within the global high yield and global multi-strategy portfolios. Before Western Asset Management, Chowdhary was a director and head of European credit research for Citigroup Asset Management, and worked in London and New York. – Sarah Husband