CIFC Corp. (Nasdaq: CIFC) saw its stock soar 22.32% Thursday after the No.1 ranked U.S. CLO manager by deals under management announced it had retained JPMorgan to explore a possible sale of the company.
Shares in the alternative asset manager, based in New York, were up $0.98 to $5.37, after revealing it was engaging JPMorgan “in exploring a range of strategic alternatives to enhance shareholder value and to capitalize on its industry-leading platform,” the company stated in a release. The alternatives include a sale of the company or a partial stake in the firm to an investor to accelerate growth and business diversification efforts.
The company did not discuss reasons for the potential sale, but the announcement follows year-end forecasts by market observers projecting a slowdown in new issuance in 2016, and a market consolidation of fewer collateralized loan obligations managers, due to forthcoming risk-retention rules. The standards would require a CLO or an affiliate to retain at least 5% of the notional value of a CLO portfolio on the books to maintain “skin in the game” and purportedly further align the managers’ interests with those of investors.
CIFC last fall had not given indications that would be a hindrance, as it had raised equity from $40 million in 10-year bond proceeds to help finance its risk-retention capital requirements. The company also stated plans to issue retention-compliant CLOs this year despite the fact the rules would not require them for deals until after December 2016.
Last November in its third quarter earnings report, CIFC management expressed optimism that rules would aid CIFC by clearing the field of a clutter of CLO managers, and thus would “improve the CLO arbitrage” for new deals “which we believe will benefit CIFC.”
Other CLO manager firms, such as Octagon Credit Investors, have chosen to sell themselves into a larger-asset company (in this case, asset manager Conning) to gain asset capital necessary to back the retention tranches.
The 11-year-old CIFC firm has approximately $14.2 billion in assets under management, serving about 200 institutional investors globally.
The company’s CIFC Asset Management unit was the leading U.S. CLO manager by the number of deals under management through mid-2015, according to Moody’s Investors Service, and ranked third globally behind GSO/Blackstone and Carlyle. The company originated five CLOs in 2015 totaling $2.6 billion.
Moody’s has not released its year-end league tables for CLO manager rankings.