CLOs
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Back on hold
European MM CLOs stymied by pandemic
The long hoped for pick up in European middle market (MM) CLO issuance was expected to arrive in 2020. However, thanks to the Covid-19 crisis, plans have had to be put on hold as middle-market firms focus on survival.
A new report from DBRS Morningstar suggests that the crisis has set back the progress of MM CLOs in .......
News 22 May 2020
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CLO manager performance assessed
Sector developments and company hires
CLO manager performance assessed
JPMorgan has issued its latest CLO manager quarterly reports for both the US and Europe.72% of US CLOs are now failing their S&P triple-C test and 38% are failing their Moody’s Caa1 test, but there are still three managers passing both tests in all of their transactions: Blackrock, DFG/Vibrant, and Silvermine. Meanwhile, JPMorgan CLO .......
Market Moves 21 May 2020
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TALF subscription date announced
Sector developments and company hires
TALF subscription date announced
Market Moves 20 May 2020
The New York Fed has scheduled the first TALF ABS loan subscription date for 17 June, with the first loan closing date to be 25 June. On fixed days each month, borrowers will be able to request one or more three-year TALF loans. The Fed has published a Master Loan and Security Agreement, which provides further details on the terms .......
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SME CLO, SRT PD adjustments mooted
Sector developments and company hires
SME CLO, SRT PD adjustments mooted
Market Moves 18 May 2020
DBRS Morningstar is considering additional adjustments to reflect expectations of a higher probability of default (PD) for borrowers underlying SME CLO and significant risk transfer deals operating in economic sectors considered to have a ‘mid-high’ or ‘high’ risk of experiencing higher levels of default, due to the coronavirus fallout. For borrowers in the ‘mid-high’ .......
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Equity uptick
CLO equity back in focus in the US secondary market
The US CLO secondary market saw a pick-up in equity activity last week. At the same time, focus has shifted to more recent vintage pieces.
“Cleaner longer-dated equity pieces are gaining support,” says one trader. “We’re also seeing a strong preference for 2019 deals versus the 2018 vintage, which is a reverse of what was going on pre-crisis. .......
News 18 May 2020
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Conflict of interest charge settled
Sector developments and company hires
Conflict of interest charge settled
Market Moves 15 May 2020
The US SEC has charged Morningstar Credit Ratings for violating a conflict of interest rule designed to separate credit ratings and analysis from sales and marketing efforts. Morningstar has agreed to pay US$3.5m to settle charges including that from mid-2015 through September 2016, credit rating analysts in Morningstar’s ABS group engaged in sales and marketing .......
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Tortuous TALF 2.0
Markets question TALF usage
The Federal Reserve this Tuesday (May 12) published more details about the terms of its $100bn new emergency lending facility generally referred to as TALF 2, and while these details were welcomed there are a still a lot of questions in the market about how useful this programme will be.
The first of those questions revolves around relative value. The cost of .......
News Analysis 15 May 2020
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Corporate actions slow down
Sector developments and company hires
Corporate actions slow down
Market Moves 14 May 2020
Negative rating actions on corporate loan issuers continue to accumulate within US BSL CLOs, though the pace is moderating, according to S&P. Since early March, more than 28% of US BSL CLO collateral has been downgraded or placed on credit watch negative by the agency, while triple-C buckets have tripled to 12.3% from about 4% (though .......
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Portfolio resilience
Technology-driven investment gaining traction
Pagaya has expanded to the US West Coast, beefing up its origination group. At the same time, the fintech firm is seeking opportunities in new asset classes and new partnerships.
As part of its expansion, Pagaya has appointed Jason Hass as svp of originations and Mike Cannatella as vp of originations, in Phoenix and Los Angeles respectively. Hass will oversee .......
News 14 May 2020
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TALF CLO rules clarified
Sector developments and company hires
TALF CLO rules clarified
Market Moves 13 May 2020
The US Federal Reserve has clarified its CLO eligibility rules for TALF. It defines its stipulation that all or substantially all of the leveraged loans underlying CLOs must have been “newly issued” as those originated or refinanced on or after 1 January 2019. The Fed also announced additional CLO portfolio requirements: maximum second lien loan concentration .......
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SFSF investments disclosed
Sector developments and company hires
SFSF investments disclosed
Market Moves 12 May 2020
The AOFM has disclosed the recent investments it has made under the Structured Finance Support Fund. In the primary market, the fund was the sole third-party investor in the A2 tranches of FirstMac 2020-1 (it also invested in the A1 through D tranches) and Liberty Series 2020-1 on 27 March and 8 May respectively. It has also .......
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Known unknown
Lack of data in MM CLOs leaves future open to interpretation
US middle market CLOs currently appear to be in a better position than their broadly syndicated loan peers, with considerably fewer negative rating actions to date. However, while the sector undoubtedly benefits from some strengths, increasing transparency could yet reveal challenges.
“Middle market CLOs have a mix of pros and cons, but we still need so much more .......
News Analysis 7 May 2020
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Ladder locks in financing
Sector developments and company hires
Ladder locks in financing
Market Moves 5 May 2020
Ladder Capital has entered into a strategic financing arrangement with Koch Real Estate Investments, under which Koch will provide the company with approximately US$206.4m in senior secured financing to fund transitional and land loans. As part of the strategic financing agreement, Koch has the right to make a US$32m equity investment in the Ladder at any time .......
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WAM guidelines finalised
Sector developments and company hires
WAM guidelines finalised
Market Moves 4 May 2020
The EBA has published its final guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche of a securitisation transaction, as laid down in the CRR. These guidelines aim at ensuring that the methodology applicable for the determination of the WAM for regulatory purposes is sufficiently transparent and harmonised .......
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MBS overvaluation case settled
Sector developments and company hires
Overvaluation case settled
Market Moves 1 May 2020
The US SEC has accepted an offer of settlement from Semper Capital Management in connection with administrative and cease-and-desist proceedings against it. On the basis of the offer, the Commission finds that from July 2013 through May 2014, Semper overvalued certain odd lot positions in securities held by the Semper MBS Total Return Fund (SEMMX), which caused .......
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Targeted action
Wholesale ratings downgrades questioned
The raft of negative rating actions currently hitting the securitisation market is perceived to be driven by the stress created by coronavirus containment efforts. To the extent that some credit ratings were heading for a downgrade before the pandemic, this stress may simply be hastening rating actions. However, there are some who question whether wholesale downgrades are helpful in the .......
News Analysis 1 May 2020
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Manager scrutiny
CLO manager performance on watch
CLO manager scrutiny is growing just as market conditions make their job harder. Nevertheless, differentiation is set to accelerate as investors have to adapt the way they assess management performance.
Jason Merrill, investment specialist at Penn Mutual Asset Management, says: “This pandemic is obviously very unusual and has thrown the market into a downturn. Winners will be those .......
News Analysis 30 April 2020
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Cautiousness prevails
European CLO market update
The European CLO market has had a solid run in to month-end this week, with the first post-Covid crash new deals and secondary activity deepening. However, cautiousness prevails.
While the BWIC market remains patchy and the colour released from it even patchier, though the weaker names generally on offer hasn’t helped, overall secondary activity has been strong this .......
News 30 April 2020
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Unlocking capital
Premod Thomas, ceo of Bayfront Infrastructure Management, answers SCI's questions
Q: Bayfront Infrastructure Management is seeking to help address an infrastructure financing gap in the Asia-Pacific region (SCI 29 April). Can you explain what you mean by this?
The Structured Credit Interview 30 April 2020
A: According to the Asian Development Bank, Asia will need approximately US$1.34trn annually in infrastructure financing between 2016 and 2020 to sustain economic growth. This represents approximately 6% of the region’s .......
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Prudential flexibility reiterated
Sector developments and company hires
Prudential flexibility reiterated
Market Moves 29 April 2020
The European Commission has adopted a package to help facilitate bank lending to households and businesses throughout the European Union that includes an Interpretative Communication on the EU's accounting and prudential frameworks, as well as targeted ‘quick fix’ amendments to the CRR, in order to maximise the ability of banks to lend and absorb losses related to .......
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Growth phase
Asian infrastructure loans eyed
Singapore-based Clifford Capital has established a holding company structure under Clifford Capital Holdings (CCH) to drive its next phase of growth. The firm plans to expand into new business lines, including the securitisation of infrastructure loans through Bayfront Infrastructure Management and the provision of private credit and mezzanine financing solutions through Keppel-Pierfront Private Credit Funds (SCI 1 April).
News 29 April 2020