CLOs

An application for the BondBloxx Private Credit CLO ETF landed with regulators on Thursday afternoon. Subject to regulatory approval, the proposed fund would invest at least 80% of its assets in collateralized loan obligations.

The Kansas City-based firm created the ETFs in response to demand from clients, in particular the wealth management community.

Chatham will provide funding for the equity portion of CLOs, according to a person with knowledge of the matter. CTM will start issuing CLOs — leveraged loans repackaged as bonds — in 2025.

As corporate treasurers use the debt reorganization technique to head off disruptive defaults and bankruptcies, lenders seek more blockers and cooperation agreements to mitigate risks.

Observers and investors weigh in on how rate cuts may shift pricing dynamics for CLO tranches.

The fund, Sound Point Meridian Capital, invests in CLO equity. Fewer than 10 of these closed-end funds trade now, partly because starting one requires a backer willing to leave the money invested for years.

The change in tone was obvious on Monday, when SBA Communications Corp. postponed the repricing of a $2.3 billion term loan.

The pension plan's investment is a show of support from one of the world's largest private markets investors for the securities.

There's been a resurgence of interest in CLOs. Gross issuance is on track for a record year in Europe, while year-to-date issuance in the market has already exceeded 2023's full-year volume.

BHI has extended the revolving line of credit agreement with Lendbuzz to $50 million, and Janus' B-BBB Collateralized Loan Obligation ETF has surpassed $1 billion in assets.

With the Federal Reserve poised to cut rates as soon as September, investors poured $245 billion overall into active and index mutual funds and exchange-traded funds in the first half of the year, according to Morningstar Direct.

Electronification of trading could fundamentally alter loan and CLO markets.

The Carlyle US CLO 2022-4 transaction closed originally on September 1, 2022.

The loan portfolio has international diversification across industries.

The booming loan and CLO markets could face hurdles unless merger & acquisition activity picks up.

The anticipated losses follow a hit to investors in a U.S. CMBS last month. Buyers of the AAA portion of a note backed by the mortgage on a building in midtown Manhattan got less than three-quarters of their original investment back after the loan was sold at a steep discount.

KKR is buying CCC loans as they are "purged" from fund managers with less risk appetite. Since so much demand has been sucked out of the market, Sheldon and Reback said they believe some parts of the CCC markets are "oversold."

Much of that growth appears to have happened since the beginning of the year. JAAA's AUM was $5.3 billion at the end of 2023, suggesting a 94% increase.

The Japanese banking giant's sub foresees vibrant 2024 and expanding CLO interest from Asian investors.

Macro, credit and securitized products and equities will each contribute 25% to 30% of the growth, with the remaining 15% coming from wealth management.