CLOs
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AGs fight Madden rule
Sector developments and company hires
AGs fight Madden rule
Market Moves 30 July 2020
The attorneys general of California, Illinois and New York have filed a suit against the OCC’s ‘valid when made’ rule (SCI 1 June), which they claim would allow the federal government to pre-empt state usury laws and allow third-party entities “to prey on vulnerable” borrowers. The AGs note that the ability to pre-empt state usury .......
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Lag lustre
Slower recovery in CLOs provides advantages and opportunities
Secondary CLO trading desks either side of the Atlantic are reporting greater re-engagement from the buy-side, which is helping to support prices. However, such support appears to be insufficient to prevent the CLO market lagging the recoveries seen elsewhere.
“CLOs have underperformed equity and other credit markets,” concedes Miguel Ramos Fuentenebro, co-founder of Fair Oaks Capital. “But in my view, .......
News Analysis 30 July 2020
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CLO ETF prepped
Sector developments and company hires
CLO ETF prepped
Market Moves 29 July 2020
Janus Henderson Investors has filed a preliminary registration statement with the US SEC in connection with the Janus Henderson AAA CLO ETF (JAAA), which is expected to launch on 22 October and will be offered to US investors. The fund will be managed by portfolio managers John Kerschner and Nick Childs, while Jessica Shill will serve as .......
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ILS issuance remains resilient
Sector developments and company hires
ILS issuance remains resilient
Market Moves 28 July 2020
US$2.8bn of property catastrophe bond limit was placed in 2Q20, bringing the total issued year-to-date to US$6.5bn, according to Aon Securities’ latest ILS Update report. In comparison, 2019 saw a total of US$5.4bn in property cat bond limit placed for the entire year. The total amount of property cat bonds outstanding is marginally down on 2019 .......
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CLO equity defies predictions
Sector developments and company hires
CLO equity defies predictions
Market Moves 27 July 2020
US CLO equity cashflow performance is defying pessimistic predictions, according to a new report from JPMorgan CLO research analysts. As of 23 July reporting, US CLO equity on average paid 8% cashflow year to date (based on 842 tranches or circa 70% of the universe) and the report estimates 89% of equity is paying, compared to .......
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ReoCo restructuring in the works
Sector developments and company hires
ReoCo restructuring in the works
Market Moves 23 July 2020
The Leviticus SPV issuer is set to implement a ReoCo structure, having appointed Credito Fondiario as the servicer to carry out all core ReoCo activities. The main purpose of the ReoCo is to encourage third-party acquisitions at auctions above auction base prices or to repossess real estate assets at otherwise empty auctions and re-sell them .......
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Green shoots
US middle market CLOs showing signs of recovery
As the broader CLO market sees increasingly significant levels of new issuance, middle market CLOs are also starting to see the green shoots of recovery. However, the sector still faces its own unique challenges, while providing some opportunities as well.
New middle market CLO deals have begun to reappear and the latest of which, Owl Rock’s US$440m Parliament .......
News Analysis 22 July 2020
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Canadian CMBS forbearance highlighted
Sector developments and company hires
Canadian CMBS forbearance highlighted
As of the June 2020 remittance reports for the Canadian conduit CMBS sector, 48 loans totalling C$559.9m were on the servicer's watchlist for coronavirus-related relief, according to DBRS Morningstar. In most of these instances, the servicer’s commentary confirmed that borrowers were granted loan modifications and/or forbearances.The majority of these loans are secured by retail .......
Market Moves 22 July 2020
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Support network
US CLO prices supported by a variety of factors
US CLO secondary market prices have come back a long way since the Covid-driven collapse in March. Spreads have softened a little since June’s tights, as summer lethargy seeps in, but are still benefiting – for now, at least – from positive broader credit market sentiment underpinned by government support for the wider economy and the CLO market’s own .......
News Analysis 21 July 2020
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UK Mortgages offer disclosed
Sector developments and company hires
UK Mortgages offer disclosed
Market Moves 20 July 2020
M&G Investment Management (MAGIM), on behalf of one of its managed funds - M&G Specialty Finance Fund (£) SCSp – has disclosed that it has made several approaches to the board of UK Mortgages Limited (UKML) with a view to making a recommended cash offer for UKML, all of which have been rejected. The most recent approach .......
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No rush
CLO investors have time on their side for resets and refis
Post-Covid US CLO issuance is gathering pace for new deals, but refinancings and resets are few and far between so far. There are opportunities for both types of restructuring, but for the vast majority of deals, there is no rush for equity investors to initiate the process.
There have only been two US CLO refinancings since the Covid .......
News Analysis 17 July 2020
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Euro CLO par burn rises
Sector developments and company hires
Euro CLO par burn rises
Market Moves 16 July 2020
After a relatively stable Q1, European CLO managers burnt an average -19bp of par in Q2 (compared to -3bp in Q1), according to JPMorgan’s latest report on the sector. Among 44 European managers, 14 managers built par in 2020 YTD by an average +19bp, while the remaining 30 managers burnt par by an average -41bp. .......
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Conflict-free trading
Benjamin Arnold, founding partner and ceo of Meraki Global Advisors, answers SCI's questions
Q: How and when did Meraki Global Advisors become involved in the securitisation market?
A: Meraki Global Advisors was founded with the rebellious determination to deliver conflict-free trading to asset managers. Meraki is a global multi-asset outsourced trading and operations firm that was launched in April 2019.We identified a need among the more sophisticated multi-asset hedge fund community .......
The Structured Credit Interview 16 July 2020
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Structural changes
New US CLO docs anticipating Volcker
Most of the US CLOs currently marketing are already being structured to incorporate changes resulting from the revised Volcker rule (SCI 26 June). At the same time, new deal documentation is also enabling greater flexibility for managers to participate in restructurings.
Despite the Volcker rule changes not being effective until 1 October, new deals are already being .......
News Analysis 15 July 2020
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LCX platform expanded
Sector developments and company hires
LCX platform expanded
Market Moves 13 July 2020
LendingClub has expanded its LCX platform to make it easier for registered institutional investors to analyse, price and bid on loans at pre-issuance, down to the individual loan level. When it was first launched, LCX enabled the company to sell previously originated loans at, above or below par, from its balance sheet. For the first time, LendingClub .......
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OC ratios examined
Sector developments and company hires
OC ratios examined
Drivers behind and expectations for European CLO OC ratios have been examined in a new report from S&P. It finds that average senior and junior OC cushions declined between February and May by 1% to remain healthy at over 8% and 3% respectively.However, S&P says: “We are seeing a wider dispersion of OC cushions across .......
Market Moves 10 July 2020
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Spanish CP vehicle formed
Sector developments and company hires
Spanish CP vehicle formed
ODF Energía has registered on MARF the first issuance of commercial paper, sized at €30m, from its innovative new Spanish securitisation fund. Dubbed HT Suministros, the fund is a multi-compartment vehicle with a maximum issuance amount of €200m, secured by the successive purchase of credit rights belonging to different companies or private businesses groups.The .......
Market Moves 9 July 2020
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CQS portfolio refinanced
Sector developments and company hires
CQS portfolio refinanced
Market Moves 8 July 2020
AnaCap Financial Partners has acquired and refinanced a portfolio of salary and pension guaranteed loans (CQS) with a face value of over €200m. Originated by a large Italian bank, these loans were initially securitised in 2016. In July 2019, AnaCap acquired the equity in the securitisation and in June 2020 it exercised its right to acquire the .......
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Positive signs for CLOs
Sector developments and company hires
Positive signs for CLOs
Market Moves 7 July 2020
US CLO manager metrics have begun to improve or stabilise, according to JPMorgan’s Q2 report on the sector, published today. “In the very latest reported data, the percent of US CLOs failing the junior-most OC test (double- or single-B) dropped from 20% a few weeks ago to 16% - likely due to higher triple-C loan market values, .......
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Volcker revision impact modest
Sector developments and company hires
Volcker revision impact modest
Market Moves 6 July 2020
The impact of the changes made to the Volcker Rule (SCI 26 June) will be relatively modest for the CLO market, according to S&P. The agency notes that nearly all current CLO documents prohibit investing in bonds, so will not see any changes unless they’re amended, which would require investor consent. However, a small number .......
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Volcker changes finalised
Sector developments and company hires
Volcker changes finalised
The CFTC, FDIC, OCC, SEC and US Fed have finalised a rule modifying the Volcker Rule's prohibition on banking entities investing in or sponsoring hedge funds or private equity funds – known as covered funds. The final rule is broadly similar to the proposed rule from January (SCI 31 January).Like the proposal, the final .......
Market Moves 26 June 2020