CLOs

  • Structural review

    New shape of European CLOs examined

    CLO issuers are having to adapt to the current market environment and consequently new deals are moving away from traditional structures. A new report from S&P examines the major changes it is seeing in proposed European issuance.

    Understandably many deals being proposed are utilising lower leverage and greater protection. “To address the increased downside risks on corporate downgrades, .......

    News 22 April 2020

  • Rating reaction?

    Potential shift to non-investment grade drives selling

    The CLO BWIC calendar has been dominated by triple-B paper so far this week, as sellers look to off-load bonds ahead of potential downgrades into non-investment grade territory. The pattern could continue for some time, with rating-sensitive investors forced to sell, pushing spreads wider.

    After Moody’s became the latest rating agency to place large swathes of CLOs .......

    News 21 April 2020

  • Moody's puts CLOs under review

    Sector developments and company hires

    Moody’s puts CLOs under review
    Moody's has placed on review for downgrade its ratings on 859 tranches issued by 358 US BSL CLOs (plus another 25 linked US CLO combo notes, secured notes and repacks) and 117 tranches issued by 39 European BSL CLOs. The affected securities represent 19% of Moody's US-rated BSL CLOs and 14% of its European-rated CLOs.

    Market Moves 20 April 2020

  • CMBS secured, unsecured sub debt weighed

    Sector developments and company hires

    CMBS secured, unsecured sub debt weighed
    Senior US CMBS loans with unsecured subordinate debt (such as mezzanine or preferred equity) show significantly lower default rates than senior loans with secured subordinate debt (such as B-notes) at comparable leverage points, according to Fitch. The agency evaluated the performance of 1,001 senior CMBS conduit loans with subordinate debt in place, issued between 2003 .......

    Market Moves 16 April 2020

  • Second wave

    Widespread CLO rating downgrades add further uncertainty

    Extensive CLO downgrades are expected to follow the widespread pandemic-driven negative rating actions already seen on underlying loans. Any such second wave is likely to hamper the market’s tentative early stage recovery and increase uncertainty and concerns over the future.

    The second wave is inevitable, asserts one CLO trader. “You have to expect to see further downgrades of CLOs themselves, .......

    News Analysis 16 April 2020

  • Uncertain ratios

    OC senior test failures accelerate, but options remain for some CLO managers to cure breaches

    As the April reporting season gets underway in earnest, the number of US CLOs failing their OC tests is accelerating and breaches are now also moving up the capital stack. However, despite difficult market conditions, some managers still have some ability to cure breaches.

    “Some deals have already started reporting late March/early April reports and some deals are .......

    News Analysis 15 April 2020

  • TALF sparks rally

    US CLO seniors tighten, but Fed support may not be enough

    The end of last week saw US triple-A CLO bonds tighten in the secondary market, partly in response to the expansion of TALF to include the asset class (SCI 9 April). There was little price movement yesterday as a result of a quiet day due to the bank holiday in Europe, but suggestions are that TALF alone is .......

    News Analysis 14 April 2020

  • TALF 2.0 eligibility expanded

    Sector developments and company hires

    TALF 2.0 eligibility expanded
    The US Fed has expanded the range of assets that are eligible collateral for TALF 2.0 to include the triple-A rated tranches of both legacy conduit CMBS and newly issued static CLOs. The size of the facility will remain US$100bn and it will continue to support the issuance of ABS that fund a wide range of .......

    Market Moves 9 April 2020

  • Mixed results

    Coronavirus consequences for European CLOs examined

    Outstanding European CLO transactions are expected to remain resilient despite downgrades and defaults being seen in lower-rated tranches. Equally, a trend towards diversification could help.

    A new report from Scope Ratings, ‘Covid-19: short and medium-term consequences for the European CLO market’, observes that a deep euro area recession is likely to lead to a wave of corporate defaults .......

    News 9 April 2020

  • EIF calls for guarantee applications

    Sector developments and company hires

    EIF calls for guarantee applications
    The European Commission has unlocked €1bn from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the EIF and allow it to issue special guarantees to incentivise lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, .......

    Market Moves 8 April 2020

  • CLO stress scenario updated

    Sector developments and company hires

    CLO stress scenario updated
    Fitch is set to apply an updated stress scenario to all CLO portfolios involving issuers with greater vulnerability to disruptions caused by coronavirus. The agency’s previous scenario focused on seven industries vulnerable to impacts from the pandemic, but will be expanded to include issuers with loans in CLOs from the automobile industry, as well as all .......

    Market Moves 7 April 2020

  • Negative outlook for asset performance

    Sector developments and company hires

    Negative outlook for asset performance
    Fitch is updating its rating assumptions for all global structured finance sectors to incorporate the economic impact of the coronavirus and related mitigation measures. The agency expects the global pandemic to result in an unprecedented economic contraction and while the rating effects will vary meaningfully across asset classes, asset performance deterioration is anticipated in almost .......

    Market Moves 6 April 2020

  • Statics deployed

    Simpler CLO structure in vogue, but creates its own challenges

    The first US CLO to price since the Covid-19-driven market collapse utilises a static structure and similar deals are expected to follow. However, such transactions could suffer greater ratings volatility than those with revolving portfolios.

    On Thursday, 2 April, Blackstone/GSO CLO Management priced the first new CLO in weeks – the static Stratus CLO 2020-1. The US$315m class .......

    News 6 April 2020

  • Credit challenges

    CLOs show resilience in stress scenarios

    Central bank and government countermeasures are likely only able to offer short-term liquidity support to businesses during the coronavirus crisis. If the circumstances continue for a lengthy period of time, credit quality could experience significant pressure, says S&P.

    In a recent scenario analysis, S&P applied 10 hypothetical stress scenarios of varying severity to a typical European CLO to .......

    News 2 April 2020

  • CRR compliance for NHG guarantee

    Sector developments and company hires

    EMEA
    Addleshaw Goddard has hired structured finance partner Rachel Kelly from McDermott Will & Emery. Kelly has three decades of experience at major international law firms, including as a partner at both Clifford Chance and Macfarlanes. Her work has been across the full spectrum of structured finance and debt capital markets transactions, public and private, national and international, advising the full .......

    Market Moves 1 April 2020

  • Advancing assistance programme prepped

    Sector developments and company hires

    Advancing assistance mooted
    Ginnie Mae is tailoring the existing disaster pass-through assistance programmes to more suitably scale to the needs of mortgage issuers in response to the Covid-19 liquidity squeeze (SCI 30 March). The GSE anticipates implementing within the next two weeks - via an All Participants Memorandum (APM) - a Pass-Through Assistance Program (PTAP), through which issuers with .......

    Market Moves 31 March 2020

  • Pressure drop

    European CLO market update

    Margin call pressures on European CLO warehouses appear to be subsiding. However, pricing levels remain volatile.

    The leveraged loan market experienced a sharp repricing in recent weeks, due to coronavirus disruption. As of last week, European loan prices had dropped by circa 20% on average, while the percentage of distressed loans trading less than 90% and less than .......

    Market Reports 31 March 2020

  • Basel 3 implementation deferred

    Sector developments and company hires

    APAC fund launch
    Pierfront Capital Fund Management has been awarded its capital market services license for fund management by the Monetary Authority of Singapore. It has also announced the first close of the Keppel-Pierfront Private Credit Fund, which aims to provide debt solutions to corporates or projects predominantly in the real asset sectors of the Asia-Pacific region. Sponsored by Pierfront .......

    Market Moves 30 March 2020

  • Capacity constraints

    Covid-19 not yet posing solvency issues

    Government and central bank actions have kept both the financial system and the real economy afloat in the short-term, amid the coronavirus disruption. The severity of this crisis for company and household finances will depend on the length of the current outbreak and political will, however.

    According to Rabobank credit analysts: “Covid-19 is now an imminent issue for .......

    News Analysis 30 March 2020

  • Euro CLO coronavirus exposure mitigated

    Sector developments and company hires

    Euro CLO coronavirus exposure mitigated
    A portion (15%) of European CLO collateral is derived from the industries most vulnerable to the coronavirus pandemic, according to Moody’s. However, the agency says that the relatively few near-term maturities of affected issuers will help mitigate the negative impact.

    The European CLOs that Moody’s rates have a median exposure of 14.7% to the sectors most .......

    Market Moves 27 March 2020

  • Research head named

    Sector developments and company hires

    North America
    David Walker has joined CIFC as head of research, responsible for leading the firm’s US credit research platform and overseeing its team of 20 research analysts. Based in New York, he reports to CIFC ceo and cio Steve Vaccaro. With over 30 years of experience in debt and equity research in North America and Europe, Walker previously served .......

    Market Moves 24 March 2020
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