The pipeline of new collateralized loan obligations increased over the past week to $17.14 billion from $15.83 billion the previous week, according to Standard & Poor’s.
All told, S&P expects 36 new vehicles to close based on deals in its ratings pipeline, versus 35 from last week.
On the other side of the ledger, optional redemptions for CLOs based on notices received by S&P now stand at roughly five vehicles, unchanged from last week.
CLOs for which S&P has issued presale reports this week include the $364 million Trinitas CLOI, sponsored by first-time manager Triumph Capital Advisors and arranged by Nomura Securities; the $347 million Cedar Funding III, sponsored by Aegon USA Investment Management and arranged by Jefferies; the $584 million Greywolf CLO III sponsored by Greywolf Capital Management and arranged by JP Morgan Securities; the $372 million Marathon CLO VI, sponsored by Marathon Asset Managementand arranged by JP Morgan Securities; Marathon is also sponsoring a CLO Repackaging 2014-1, a ¥25 billion ($246 million) deal intended to function as a balance guaranty currency swap for a portion of the senior notes of Marathon CLO VI.
Other deals in the pipeline this week include the $257 million JFIN MM CLO 2014, sponsored by Jefferies Finance and arranged by Jefferies; and the $330 million Halcyon Loan Advisors Funding 2014-2, sponsored by Halcyon Loan Management and arranged by Citigroup Global Markets.
Issuance is picking up despite continued uncertainty about whether banks will be forced to unload billions of dollars of CLO notes in order to comply with the Volcker Rule. On Monday, the Federal Reserve announced a two-year extension of the deadline for banks to bring their CLO holdings into compliance, to July 2017.
The Volcker Rule prohibits banks from having an “ownership interest” in securitizations of any assets other than loans. Most CLOs issued before the rule was published in December are backed by bonds as well as loans. And the senior securities issued by CLOs typically give holders the right to fire the investment manager for cause, which could be construed as an ownership interest.
The industry is still lobbying regulators to clarify what constitutes an "ownership interest" under the Volcker Rule or to grandfather existing CLOs.