CLOs

  • Secondary supply

    Euro ABS trading set to dominate

    European ABS secondary spreads have completed a three-quarter circle from their coronavirus-related spike in March, relative to their tightest levels observed in February. The market saw a notable rise in trading volumes, following the coronavirus shock, with secondary activity expected to dominate in the early part of 2021.

    “There has been significant BWIC activity in the last few .......

    News 22 December 2020

  • Issuance forecasts lowered on TFSME extension

    Sector developments and company hires

    Issuance forecasts lowered on TFSME extension
    The Bank of England has extended by six months the TFSME, covering both the drawdown period and the reference period of the scheme. The former will now run until 31 October 2021, while the latter will run from 31 December 2019 to 30 June 2021.

    JPMorgan international ABS analysts expect eligible banks and .......

    Market Moves 18 December 2020

  • Margin call

    CLO equity arbitrage doubts raised

    CLO new issuance is once again flourishing as the arb continues to improve, but the pick-up in volumes could yet prove to be premature. New investment performance data suggests current criteria are underestimated and also reveal a disparity between European and US returns.

    “The market thinks a net collateral interest margin of 150bp (including management fees) is enough to make .......

    News Analysis 18 December 2020

  • CLO manager transfers accelerate overlap

    Sector developments and company hires

    CLO manager transfers accelerate overlap
    When managers acquire CLOs, the underlying portfolios become more like the existing portfolios of the acquiring manager, according to a new report from Fitch.

    During 2020, Fitch noted four CLO contract changes, two platform sales and two ownership changes. The contract sales this year were Crestline Denali’s sale of CLO management contracts to Ares .......

    Market Moves 16 December 2020

  • CLO liquidity complexity examined

    Sector developments and company hires

    CLO liquidity complexity examined
    CLO secondary market activity is booming across the board, but the underlying liquidity picture is a complex one, according to a new report by JPMorgan CLO research analysts.

    CLO BWIC trading volume has already reached an all-time annual high in 2020 at US$48.1bn for the US and €11.7bn for Europe, the JPMorgan report says. However, it adds .......

    Market Moves 11 December 2020

  • Disclosure charges settled

    Sector developments and company hires

    Disclosure charges settled
    BlueCrest Capital Management has agreed to pay US$170m to settle US SEC charges concerning inadequate disclosures, material misstatements and misleading omissions. These charges concern the firm’s transfer of top traders from its flagship client fund, BlueCrest Capital International (BCI), to BSMA Limited, a proprietary fund, and replacement of those traders with an underperforming algorithm. The SEC’s order .......

    Market Moves 9 December 2020

  • Real return

    Money managers unlikely to be able to resist CLOs

    The rapid Covid-driven blow-out in US CLOs, followed by an equally dramatic reverse, wrong-footed many real money managers and skewed their perception of the sector’s risk-reward profile. Consequently, some have been hesitant to return to the market. But, as 2021 approaches, many will re-join investment managers that didn’t step away, along with new investors all seeking the returns they .......

    News Analysis 9 December 2020

  • ADI securitisation review underway

    Sector developments and company hires

    ADI securitisation review underway
    The Australian Prudential Regulation Authority is undertaking a review of securitisation practices, having recently identified repurchased residential mortgage loans at some authorised deposit-taking institutions that were subject to repayment deferral from their securitisations. In APRA’s view, this represents implicit support, which is inconsistent with Prudential Standard APS 120 Securitisation. APS 120 requires ADIs to be clearly .......

    Market Moves 8 December 2020

  • CMBS value deficiencies compared

    Sector developments and company hires

    CMBS value deficiencies compared
    DBRS Morningstar has identified US$9.79bn in US CMBS loans transferred to special servicing since March, whose collateral was subsequently reappraised. Although updated appraisals on properties backing these loans suggest an average value decline of 24% since origination, only about 17% have a loan-to-value ratio of 100% or higher, resulting in a value deficiency. The analysis also .......

    Market Moves 7 December 2020

  • Leveraged finance: stepping into the void

    Contributed thought leadership by Ocorian

    As funds continue to reallocate capital to direct lending strategies, Sinead McIntosh, business development director at Ocorian, a global leader in corporate and fiduciary services, fund administration and capital markets, highlights the crucial role of independent loan service providers in streamlining fund loan portfolios

    In a continuation of the legacy of the 2007-2008 global financial crisis, large commercial banks .......

    Talking Point 7 December 2020

  • Pre-pandemic trends persist for US CLOs

    Sector developments and company hires

    Pre-pandemic trends persist for US CLOs
    Pre-pandemic trends in US leveraged lending - including high leverage, weak covenants and declining recoveries - resumed by 3Q20 and should continue into 2021, absent a renewed downturn, according to Moody’s. Consequently, the agency expects that in 2021 US CLOs will include structural features for maintaining loan workout and trading flexibility to help manage .......

    Market Moves 2 December 2020

  • Tech solution

    Peter Jasko, ceo at Semeris, answers SCI's questions

    Q: How and when did you become involved in the securitisation market?

    A: Semeris launched last month (SCI 4 November), but I started getting involved in securitisation and CLOs in particular in 2001. I had been involved in the credit derivatives market for a couple of years prior to that, looking at basket trades and cranking the .......

    The Structured Credit Interview 2 December 2020

  • NPL ABS capital treatment amended

    Sector developments and company hires

    NPL ABS capital treatment amended
    The Basel Committee has published a technical amendment in connection with the capital treatment of non-performing loan securitisations. The rule aims to close a gap in the Basel framework by setting out prudent and risk-sensitive capital requirements for NPL ABS.

    The Committee consulted publicly on the technical amendment during the summer (SCI 24 .......

    Market Moves 27 November 2020

  • Jumbo BDC merger agreed

    Sector developments and company hires

    Jumbo BDC merger agreed
    FS/KKR Advisor, a partnership between FS Investments and KKR Credit Advisors (US), has announced that FS KKR Capital Corp and FS KKR Capital Corp II - two publicly traded BDCs advised by FS/KKR - have entered into a definitive merger agreement. The merger will create one of the largest BDCs in the US, with US$14.9bn in .......

    Market Moves 26 November 2020

  • EBA SRT report released

    Sector developments and company hires

    EBA SRT report released
    The EBA has published its long-awaited report on significant risk transfer in securitisations, which includes a set of detailed recommendations to the European Commission on the harmonisation of practices and processes applicable to the SRT assessment. The EBA proposals aim to enhance the efficiency, consistency and predictability of the supervisory SRT assessment within the current securitisation .......

    Market Moves 23 November 2020

  • Highland trio launch new firm

    Sector developments and company hires

    Highland trio launch new firm
    Ex-Highland Capital Management executives Mark Okada, Jack Yang and Trey Parker have launched Sycamore Tree Capital Partners, an asset management firm specialising in private and alternative credit. Okada will serve as ceo, Yang will serve as president and head of business development, and Parker will serve as cio. John Muse and Ken Hersh are strategic .......

    Market Moves 20 November 2020

  • Automated alternative

    CLO tax solution getting traction

    An automated alternative to the traditional season-and-sell process that enables tax efficiency for CLOs is starting to gain traction. Smaller firms are expected to be the earliest adopters, though the programme’s efficiencies could benefit all collateral managers. 

    Season and sell is utilised by US CLOs that are typically Cayman corporations designed not to be engaged in a US trade or .......

    News Analysis 19 November 2020

  • Garrison CLO platform acquired

    Sector developments and company hires

    Garrison CLO platform acquired
    Mount Logan Capital subsidiary Mount Logan Management (ML Management) has acquired from Garrison Investment Management (GIM) and other sellers the rights under certain interests and agreements relating to Garrison Funding 2018-1 and Garrison MML CLO 2019-1, as well as the rights under certain side letter agreements, for a purchase price of US$3m. As of 30 June .......

    Market Moves 13 November 2020

  • Transition revamp?

    Legacy language amendments remain challenging

    Standard Libor fallback language has been agreed and adopted by some new transactions ahead of the benchmark transition next year (SCI passim). However, language amendments for legacy transactions remains challenging.

    “Government agencies have been pretty clear on the fact that Libor will not be extended. For several years now, new transactions have been printed with satisfactory fallback language. .......

    News Analysis 13 November 2020

  • Shortfalls hitting rated CMBS notes

    Sector developments and company hires

    Shortfalls hitting rated CMBS notes
    KBRA reports that over 85% (225) of the 263 deals in its rated US conduit CMBS universe have been impacted by interest shortfalls to varying degrees. Prior to the coronavirus pandemic, shortfalls occurred in just over 40% (110) of the transactions, as of February 2020.

    “The increase is not surprising, as interest shortfalls are .......

    Market Moves 12 November 2020

  • CLO resurgence?

    Primary spike contingent on sustained positivity

    The US CLO market’s presidential election lull continued into this week ahead of yesterday’s holiday, despite the rally in equity and broader credit, with no new deals priced since 2 November. However, issuance could now take-off if a variety of factors align and positive sentiment can be sustained.

    “The ferocity of the broad market rally has taken everyone .......

    News 12 November 2020
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