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Small loan fund inflow keeps inflow streak going at 95 weeks

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $48 million for the week ended April 9, according to Lipper. Of the total, just 7% was tied to the ETF segment.

loan_flow_4.10_650

This is the lowest weekly total of the year, and it’s down from $127 million last week and $257 million two weeks ago. Retail-cash flows to the asset class have settled into a lower range following a hot start to 2014 as there hasn’t been a single weekly total above $700 million since January. Moreover, this is the lowest one-week reading dating back 75 weeks, to the week ended Oct. 31, 2012.

The four-week trailing average dipped to $190 million, from $321 million last week and $379 million two weeks ago. Still, the net inflow streak is now at 95 weeks, with a total of $66.7 billion over that span, by the weekly reporters only.

Year-to-date inflows total $7 billion, of which $1.08 billion is ETF-related, or 16% of the sum. In the comparable year-ago period, inflows were $15.1 billion, with 11% tied to ETFs.

The change due to market conditions was negative $77 million. Total assets stood at $109.6 billion at the end of the observation period, with ETFs comprising $8.4 billion of the total, or approximately 8%. – Joy Ferguson

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US loan funds see smallest cash inflow since Nov. 2012, $127M

loan fund flows 4.2.14

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $127 million for the week ended April 2, according to Lipper. Of the total, roughly 24% was tied to the ETF segment.

This is the lowest weekly total of the year, and it’s down from $257 million last week and $327 million two weeks ago. Retail-cash flows to the asset class have settled into a lower range following a hot start to 2014 as there hasn’t been a single weekly total above $700 million since January. Moreover, this is the lowest one-week reading dating back 73 weeks, to the week ended Nov. 7, 2012.

The four-week trailing average dipped to $321 million, from $379 million last week and $483 million two weeks ago. Still, the net inflow streak is now at 94 weeks, with a total of $66.6 billion over that span, by the weekly reporters only.

Year-to-date inflows total $6.9 billion, of which $1.08 billion is ETF-related, or 16% of the sum. In the comparable year-ago period, inflows were $14.1 billion, with 11% tied to ETFs.

The change due to market conditions was positive $241 million. Total assets stood at $107.2 billion at the end of the observation period, with ETFs comprising $8.4 billion of the total, or approximately 8%. – Joy Ferguson

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CLO issuance hits $10.8B in March, most in “CLO 2.0″ era

In yet another sign of unrelenting institutional investor appetite in the leveraged loan space, CLO issuance in the U.S. totaled $10.8 billion in March, the highest monthly figure since May 2007, before the financial markets all but collapsed and structured finance – and certainly collateralized loan obligation vehicles – disappeared for several years, re-emerging in 2011.

These post-meltdown deals have been dubbed CLO 2.0 vehicles.

With the March activity CLO issuance so far in 2014 totals $22.3 billion. While a hefty amount, the first-quarter figure trails the $26.3 billion seen during the same period in 2013. For all of last year there was $82.6 billion in U.S. CLO issuance, a record, according to S&P Capital IQ/LCD.

The CLO market looks set to continue (on both sides of the Atlantic), at least in the near term. April’s pipeline of deals suggests a solid start to the quarter, although the combination of the looming Easter break and the IMN’s 3rd Annual Investors Conference on CLOs & Leveraged Loans in New York later in the month could interrupt issuance, says LCD’s Sarah Husband, who tracks the CLO market.

In terms of upcoming deals the U.S. has a number of transactions set to price soon, says Husband, including:

  • Pinnacle Park CLO ($408.26 million) via Wells Fargo
  • Capital Partners CLO 19 via Citi
  • CIFC Funding 2014-II CLO via RBS
  • Catamaran CLO 2014-1 via Citi

US CLO issuance

CLOs are special-purpose vehicles set up to hold and manage a pool of leveraged loans. You can read more about how CLOs work here.

The booming CLO market comes as cash continues to pour into the leveraged loan asset class. Indeed, U.S. loan funds last week saw their 93rd straight week of net inflows, totaling $66.5 billion, according to Lipper. The last outflow was mid-2012.

 

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Leveraged loan fund inflows dwindle to $257M though streak hits 93 weeks

loan fund flows

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $257 million for the week ended March 26, according to Lipper. Of the total, roughly 3% was tied to the ETF segment.

This is the third-lowest weekly total of the year, and it’s down from $327 million last week and $574 million two weeks ago. Retail-cash flows to the asset class have settled into a lower range following a hot start to 2014. There has not been one week over $700 million since January.

The four-week trailing average dips to $379 million, from $483 million last week and $504 million two weeks ago. Still, the net inflow streak is now at 93 weeks, with a total of $66.5 billion over that span, by the weekly reporters only.

Year-to-date inflows total $6.8 billion, of which $1.05 billion is ETF-related, or 15% of the sum. In the comparable year-ago period inflows were $13.3 billion, with 11% tied to ETFs.

Last year’s full-year inflows totaled $52.3 billion, 10% of which was tied to ETFs.

The change due to market conditions was positive $26.1 million. Total assets stood at $109.2 billion at the end of the observation period, with ETFs comprising $8.4 billion of the total, or approximately 8%. - Joy Ferguson

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Leveraged loan funds see 92nd straight week of cash inflows, totaling $66.3B

US leveraged loan fund flows

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $327 million for the week ended March 19, according to Lipper. Off the total, roughly 16% was tied to the ETF segment.

This is the third lowest weekly total of the year, and it’s down from $574 million last week and $358 million two weeks ago. Retail-cash flows to the asset class have settled into a lower range following a hot start to 2014 as there has not been one week over $700 million since January. The four-week trailing average dipped to $483 million, from $504 million last week and $510 million two weeks ago.

Still, the net inflow streak is now at 92 weeks, with a total of $66.3 billion over that span, by the weekly reporters only.

Year-to-date inflows total $6.5 billion, of which $1.04 billion is ETF-related, or 16% of the sum. In the comparable year-ago period, inflows were $12 billion, with 12% tied to ETFs.

Last year’s full-year inflows totaled $52.3 billion, 10% of which was tied to ETFs.

The change due to market conditions was negative $18.9 million. Total assets stood at $108.9 billion at the end of the observation period, with ETFs comprising $8.4 billion of the total, or approximately 8%. – Jon Hemingway

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Feingold O’Keeffe prices $414M CLO via StormHarbour

StormHarbour Securities yesterday priced a $414 million CLO for Feingold O’Keeffe Capital.

The CLO is structured as follows:

The transaction is the second CLO arranged and placed by StormHarbour for Feingold O’Keeffe Capital, following the $512 million Longfellow Place CLO placed in January last year.

With Feingold’s deal, CLO issuance in the year to date rises to $19.61 billion across 38 deals, according to LCD. In March, 15 CLOs have priced totaling $8.12 billion. – Sarah Husband

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U.S. CLO equity distribution levels decline in 2013′s second half, S&P says

Equity distributions for U.S. collateralized loan obligation (CLO) transactions have declined from the highs seen at the start of 2013, but they still offer positive returns, according to an article published on Friday by Standard & Poor’s Ratings Services. S&P believes this decrease resulted from a decline in leveraged loan spreads and LIBOR floor levels, and heightened loan repayment levels.

Most CLO 1.0 deals are outside their reinvestment periods, so cash from loan repayments was used to pay down the CLO liabilities, increasing the weighted average cost of funds for the CLOs. Combined with an overall decline in the spread and LIBOR floor levels of the assets, this resulted in a significant decline in equity distributions in the second half of 2013.

For CLO 2.0 transactions, the decline was not as dramatic. Because most CLO 2.0s are still in their reinvestment periods, these transactions reinvested the cash received from loan repayments last year – albeit at a lower spread and LIBOR floor level – and their cost of funds did not increase like that of CLO 1.0s.

As CLO 1.0s continue to amortize Standard & Poor’s expects their equity distributions to decline, though equity investors still have a final payment to look forward to if and when they decide to call the redemption option. The agency also expects some CLO 2.0 equity distributions to decline as they begin to pay down their notes, and expects those with lower equity yields to either be optionally redeemed or refinanced, leaving behind deals with healthier distributions.

S&P published the full article, “U.S. CLO Equity Distributions Decreased During The Second Half Of 2013, But Returns Are Still Positive,” on March 14, 2014. The report is available to RatingsDirect subscribers at www.globalcreditportal.com and www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you can purchase a copy of the report by calling (1) 212-438-7280, or sending an e-mail to research_request@standardandpoors.com.

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Leveraged loan fund inflow streak hits 91 weeks totaling $65.9B

US leveraged loan fund flows

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $574 million for the week ended March 12, according to Lipper. Of the total, roughly 41% was tied to the ETF segment.

This latest result is up from $359 million of inflows last week and keeps with the see-saw pattern that has developed over the past six weeks. The four-week trailing average held steady, at $504 million, from $511 million last week and $478 million in the week prior. The net inflow streak is at 91 weeks, with a total of $65.9 billion over that span, by the weekly reporters only. Year-to-date inflows total $6.2 billion, of which $990 million is ETF-related, or 16% of the sum.

In the comparable year-ago period, inflows were $10.5 billion, with 12% tied to ETFs. Last year’s full-year inflows totaled $52.3 billion, 10% of which was tied to ETFs. The change due to market conditions was positive $13 million, or essentially nil. Total assets stood at $108.6 billion at the end of the observation period, with ETFs comprising $8.3 billion of the total, or approximately 8%. – Matt Fuller

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Leveraged loan funds see 90th straight cash inflow ($359M)

loan fund flows 3.6

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $359 million for the week ended March 5, according to Lipper. Of the total, roughly 35% was tied to the ETF segment, the highest share since August 2012.

This latest result is down from $673 million of inflows last week and keeps with the see-saw pattern that developed over the past six weeks. The four-week trailing average still rose this week, to $511 million, from $478 million last week and $425 million in the week prior.

The net inflow streak is now extended to 90 weeks, with a total of $65.4 billion over that span, by the weekly reporters only.

Year-to-date inflows total $5.6 billion, of which $755 million are ETF-related, or 13% of the sum. In the comparable year-ago period, inflows were $9.3 billion, also with 12% tied to ETFs.

Last year’s full-year inflows totaled $52.3 billion, 10% of which was tied to ETFs.

The change due to market conditions was positive $244 million, the largest since the first week of the year. Total assets stood at $105.7 billion at the end of the observation period, with ETFs comprising $8.1 billion of the total, or approximately 8%. – Jon Hemingway

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Busy times for U.S. CLO market; $11.49B in first two months of 2014

The CLO market remains active, as six deals priced last week, totaling about $3.06 billion. Overall, 18 CLOs priced in February totaling $8.94 billion, according to LCD. Issuance in the year to date stands at $11.49 billion across 23 deals, versus $15.52 billion in the same period last year.

Of interest, Carlyle priced two deals last week, one in the U.S. and one in Europe, making it the second manager, along with 3i, to print CLOs on both sides of the Atlantic this year (see below). GC Investment Management’s CLO was based off mid-market loans, while Napier Park’s upsized $492.3 million CLO included a $50 million A-1 loan tranche, which sources suggest was structured as a loan to allow a bank holder to put it in its hold-to-maturity book, as opposed to accounting for it on a mark-to-market basis.

Meanwhile, Sankaty joined the refinancing wave, becoming the third manager to lower its cost of funding via a repricing. All three have been arranged by RBS.

There was much chatter that the $571.4 million OWIC that hit the market last Wednesday – of which about 67% was said to have traded – was an account sourcing assets for a new CLO. While an efficient way to build a collateral pool, the manager could end up paying up for the assets, which may impact the equity returns of a CLO, sources suggest.

Two other CLOs priced last week – for Zais Group and Tall Tree Investment – and with these deals in the mix, the global CLO market had its busiest week since Thanksgiving 2013, according to J.P. Morgan in its U.S. Fixed Income Strategy research note on Feb. 28.

Zais priced a $310.85 million CLO via J.P. Morgan, while Tall Tree Investment priced a $408.5 million CLO via Guggenheim and Jefferies.

The pipeline remains busy, and Citi in particular has been active of late. Price guidance emerged for Ares XXIX CLO (via Citi), while Onex is expected to price its first CLO of the year imminently, also through the bank. The arranger also has deals in the works for TPG and Trimaran Advisors too, sources say.

Western Asset Management has yet to price its CLO via Deutsche Bank, while Och-Ziff guided its CLO via Bank of America Merrill Lynch in the L+155 area last week.

Other managers working on deals include GoldenTree (via JPM), KVK (via GS), Fortress (via Natixis), and Nebula Capital (via Nomura).

The new-issue market appears to have settled into its post-Volcker swing, but the growing anticipation of a favorable response regarding both the grandfathering of legacy deals, as well as a clarification over ownership interest for new CLOs, is also supporting primary issuance.

Last week saw yet another Congressional hearing, which brought the draft legislation prepared and circulated by Rep. Andy Barr (R-Ky.) to the market’s attention. The bill’s passage would resolve a significant portion of the Volcker problem for CLOs, in that it proposes to grandfather in any CLO issued prior to Dec. 31 2013. It also addresses the ownership interest issue for new CLOs by clarifying that the ability to participate in the removal or replacement of a CLO manager for cause does not constitute an ownership interest.

Perhaps even more edifying was the degree of bipartisan support for the CLO market, both around Volcker and risk retention with regard to the Qualified CLO concept. As noted by the LSTA in its weekly market review: “There was a spirited discussion around the Volcker Rule, with the Republican lawmakers strongly in favor of the Barr bill, and the Democratic lawmakers in favor of a narrower fix for CLOs. The key takeaway here is that both Republican and Democratic lawmakers are in favor of some form of fix for Volcker for CLOs.”

Across the pond

The European CLO market revved up last week, with two deals pricing and a very well-attended conference taking place in London. As a result there is a positive vibe around the CLO primary market, which – with two more deals expected to price over the next week – looks better positioned to achieve the €10 billion of new issuance forecasted for this year.

3i Debt Management and CELF Advisors both upsized their CLOs to €425 million and €375 million respectively.

These latest transactions join Alcentra’s Jubilee CLO 2014-XI, which priced in January, and take YTD issuance to €1.21 billion, according to LCD.

That tally could rise to as much as €2 billion over the next week, with two more CLOs expected to price in the coming week or so – ICG’s St Paul’s IV via Deutsche Bank, and Babson Capital Europe’s Babson Euro 2014-1 via Bank of America Merrill Lynch.

A look further down the pipeline reveals at least another 15 managers said to be looking to tap the market this year. The 15 are (in alphabetical order) Alcentra, Apollo, Ares, Avoca, AXA, Cairn, Chenavari, CVC, GLG, GSO Blackstone, Pemba, Pinebridge, Pramerica, Rothschild, Sankaty. Note that numerous managers are said to looking for multiple prints in 2014.

Although the pace looks to be picking up, the relative scarcity of European 2.0s is helping European managers print tighter AAA coupons than their U.S. counterparts, and both last week’s deals priced at E+140, (no discount margins were provided in either case), versus coupons of L+150 seen on recent U.S. CLO prints. – Sarah Husband