CLOs backed by loans to small and medium sized companies account for roughly the same percentage of the total market so far this year as last year, according to Wells Fargo.
So far this year, seven middle market collateralized loan obligations have priced from six issuers, for a primary volume of $3.0 billion.
In 2014, middle market CLO issuance was only 5.8% of total U.S. CLO issuance; year, year to date, it is only slightly less: 5.5% of total U.S issuance.
As of the end of the first quarter, Wells Fargo shows $22 billion outstanding of middle market CLOs—with $16 billion of that in post-crisis deals.
“We believe that middle-market lenders face similar headwinds (lower supply and more competition for assets) as broadly syndicated loan investors, but on a much smaller scale,” analyst David Preston said in a report published Monday.
That competition will only get worse as the result of the entrance of two new players: the Canada Pension (CPPIB), which is buying GE Capital’s sponsor finance business (Antares) and a $3 billion loan book for $12 billion. Also, Ares Capital Corp. (which had partnered with GE Capital) has announced a new middle-market lending partnership with Varagon Capital Partners—with AIG as the anchor investor.
“At this point, it appears that this equates to double the capacity and double the competition,” Preston said.