Commercial lending

Spreads and investor demand make conditions ripe for a surge in CLO deals before the election, but a strain on loan supply may complicate the picture.

Brigade Capital Management, Blackstone Group Inc., CIFC Asset Management and Bardin Hill Investment Partners are among the firms looking to change the terms of the CLOs they oversee to put them on better footing when companies they’ve lent to can’t meet their obligations. Collateral managers are often handcuffed in distressed situations due to strict checks on the risks they can take.

Commercial real estate loans are vulnerable as financial assistance for tenants winds down and might not be fully renewed. Late rent payments could rise, leading lenders to press landlords to pay up.

“The Fed has made it clear that they don’t want a liquidity problem in the Treasury market or the higher-grade corporate market,” Fuss said. “They cannot, unfortunately, underwrite lending in the private markets.”

Commercial real estate companies are among those left out of the Federal Reserve’s middle-market relief program, but House members said they need government-backed financing to navigate the pandemic as much as anyone.

Private equity firms are hitting the U.S. leveraged loan market at the fastest pace in years to fund shareholder payouts with about $8.6 billion of dividend recapitalization deals launched this month.

Deals, trends and research in structured finance and asset-backed securities for the week of Sept. 11-17

Banks reported decent loan growth in the spring and early summer as businesses rushed to draw down credit lines and tap the Paycheck Protection Program. But demand has been muted since, and bankers can only guess when it will pick back up.

The prospective payout is so alluring to investors that they’ve placed three times as many orders as bonds and loans available for sale. That allowed Delta to boost the size of the deal from an original $6.5 billion, enough for the company to rule out the need for any federal aid.

The captive-finance lender for U.S. Mercedes-Benz deals closed on its second transaction of the year, and the first auto-lease ABS to price since July.