CLOs

Natixis’s co-head of structured credit and credit trading has left the bank to join New York-based private equity shop Blue Owl Capital, as the firm seeks to step up its efforts in the collateralized loan obligation market.

Mizuho Securities’ head structurer of collateralized loan obligations has joined New York-based private equity firm Blue Owl Capital as it makes a push into the broadly syndicated CLO industry. 

Citigroup and Bank of America have teamed up with five other banks to form Octaura Holdings, an electronic trading platform for syndicated loans and collateralized loan obligations.

The Neuberger Berman pool has an average credit quality of ‘B’ on the indicative portfolio, which indicates a highly speculative credit quality.

On average, CLOs had a default exposure of 0.1% at the end of May, according to the latest update from Fitch Ratings.

Over the next three decades it will cost about $100 trillion to meet net-zero emissions goals, not to mention the funds needed to address other environmental and social problems.

A return by the Japanese bank, even on a smaller scale than previously, would inject fresh demand into a European market where CLO costs have spiked to the highest in two years.

The drop in CLO issuance from Q1 volume raised no alarms, coming off last year’s record $187 million issuance, and experts see strong production for 2022.

The past few weeks have seen no fewer than five acquisitions of U.S. alternative credit shops that specialize in CLOs or bundles of the securitized vehicles.

Despite perceptions that smaller companies are riskier, they pose less risk to investors. Realized loss rates are lower, and they deliver higher returns.

The U.S. economy is relatively insulated from the events unfolding in Eastern Europe. Western Europe may be affected indirectly by higher energy prices.

The transaction, expected to close on March 2, has a non-call period end date of two years from the expected closing, a reinvestment period end date of April 15, 2026.

A broader investor base, rising inflation and higher interest rates are likely to result in significant demand for CLO bonds, which have experienced few defaults.

Deerpath’s average portfolio turnover rate of 37.8% over the past 12 months was higher than the 25.3% of all CLO 2.0 transactions.

While the indicative portfolio has an average credit quality of ‘B’ or ‘B-,’ Fitch also points out that the class A-1 notes have a 43.0% credit enhancement level.

The size of the current deal stems mostly from the ‘AAA’ piece, which was $210 million, compared to $162 million in the last ABS. Earlier deals hovered around $250 million.

Collateralized loan obligations may have to wait until 2022, because the market is seeking price discovery -- but has little incentive to jump first.

One issuer says inclusion of enhanced reporting is the first step toward putting the entire RMBS platform on the blockchain.

BDS 2021-FL9 is allowed to be fully collateralized by multifamily or manufactured housing properties, although it has concentration limits on other property types.

The July 21‘Risk Alert’ brings practices most common to hedge fund managers under scrutiny, but CLO managers who replicate those practices should also take heed.