To combat a CLO market frozen stiff by a lack of new capital, price declines, and waning confidence, some firms are working on new CLO portfolio strategies to bring in business and keep current clients interested in the loan market.
Citigroup, Morgan Stanley, Natixis, JPMorgan, Prudential, Barclays and Deutsche Bank are some of the firms creating new CLO structures that have just two tranches, sources said. In this structure, one tranche is all triple-A debt and the other is equity - a nomenclature for unrated debt. These structures differ from the multi-tranche CLOs that helped balloon the securities market to more than half a trillion. Those CLOs had everything from mezzanine to triple-C tranches.