Cash balances for U.S. 2.0 collateralized loan obligations and for European CLOs have climbed in 2013, according to Thomson Reuters.
U.S. CLOs have approximately $15 billion in cash, which represents 5.6% of their assets, an increase from 4.6% of assets at the start of the year. This level may obscure the wide dispersion between CLO 1.0s and 2.0s, Thomson analysts said. CLO 1.0s have a higher share of cash in their portfolios—7.6%—compared to CLO 2.0s with 2.3%. This cash share of CLO 1.0s increased this year, though it did decrease slightly in July. This means that it is more difficult to deploy cash as CLOs move out of their reinvestment periods.
Of the CLOs that are still in their reinvestment period, 42% have a cash balance of less than 1% of assets. Only 12% of CLOs active in the U.S. have more than 10% of their assets in cash, compared to 37% of U.S. CLOs that are past their reinvestment period.
For European CLOs, the share of cash held has increased to 5.5% (€4 billion) from 3.7% at the start of 2013. And 22% of post-reinvestment European CLOs have more than 10% of their assets in cash. European CLOs still in their reinvestment period have about 7% of their assets in cash.
Total U.S. loan issuance is at $1.27 trillion year-to-date. U.S. high yield bond issuance is at $207.52 billion year-to-date, according to Thomson Reuters.