Investments

Money managers including Owl Rock Partners, Pretium and PGIM are racing to add workers with restructuring and bankruptcy experience as they take in record amounts of cash to buy cheap assets battered by the economic fallout of the coronavirus pandemic.

An article in The Atlantic warning that collateralized loan obligations will be banks’ next downfall overestimates the risk of these securities.

Restricted from taking on distressed debt or debtor-in-possession loans, CLO managers are being left out of opportunities in coronavirus-related debt restructurings. "It's frustrating," says one manager. "We are supposed to be the bully, not the one being pushed around.”

Longstanding CLO manager Western Asset Management just priced its first deal of 2020, and despite the transaction's much more conservative structure, spreads doubled from its deal a year earlier.

The breakdown, described by people with knowledge of the relationship, is among the many scuffles emerging on Wall Street as the coronavirus pandemic pits distressed companies and their owners against lenders.

S&P lowered the ratings on 23 tranches of notes in the deals, affirmed eight others, and kept the other 40 notes on watch for potential downgrade. Twenty of the downgraded notes are on notice for potential future downgrades, as well.

Four transactions from three managers, Alcentra, Barings and Bardin Hill, showed a breach of one or more of their so-called over-collateralization tests based on May filings.

Bain joins firms like Blackstone Group Inc., Oaktree Capital Group LLC and Carlyle Group Inc. in looking to capitalize on potential opportunities created by the coronavirus pandemic that has hammered businesses.

Leveraged loans and collateralized loan obligations do not represent an "existential" threat to the global economy or to the U.S. banking system, as some recent highly charged reports have suggested.

There are any number of reasons to fret about America’s recovery from the coronavirus crisis. A repeat financial collapse at the hands of a structured product with a similar sounding acronym isn’t one of them.

The subprime mortgage meltdown turned Pacific Investment Management Co. off the CLO business for a decade. Now the coronavirus crisis is luring it back.

Unlike in previous years, the results from two different evaluations will be released simultaneously and will include an assessment of bank capital under coronavirus-related scenarios.

The firm will offload parts of its business including its business development company, Garrison Capital Inc., and other credit vehicles.

Fitch Ratings is evaluating all 59 middle-market collateralized loan obligations it rates for potential downgrades, over concerns of the ability of small-business borrowers to support loan payments under COVID-19 stresses.

Credit deterioration is slowing in broadly syndicated CLOs – but a large percentage of deals are still failing certain performance tests under the weight of underlying asset downgrades and lower payment flows from obligors.

“Since April, the decline in corporate credit has resulted in a significant number of downgrades among the assets underlying some CLOs,” a Moody’s press release stated on Wednesday.

Recent good fortunes for lenders such as Loanpal and Sunnova reflect what will could be a solid year for solar-panel loan originations and securitizations, despite the economic impact of the coraonvirus pandemic on markets and consumer spending.

The FHFA looks to shed light on the amount of funds Fannie and Freddie will need to hold for their risk-sharing deals.

Shut out from many coronavirus relief programs, private equity companies have found a back door at HHS, where they have borrowed at least $1.5 billion.

The general structure of this year’s reviews is unchanged despite the pandemic. But a supplemental analysis of banks' response to the downturn could weigh heavily in evaluating 2020 capital distributions and making adjustments to the tests over the long run.