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While CLO issuance climbs, pool of CLO managers remains small compared to 2008 numbers
By Cristal Cody
Tupelo, Miss., July 10 - Although the collateralized loan obligation market rose from the dead this year, with a rush of deals and more than $70 billion of issuance expected for the year, some CLO managers are not getting back into the game, according to market sources.
Apollo Global Management, LLC, Ares Management LLC, Carlyle Investment Management LLC and Cairn Capital Ltd. all returned to the market in 2013 with new CLO transactions.
Other companies, such as First Tennessee National Corp., which was counted among the world's top CDO market makers in 2008, got out of the business when the financial crisis of 2008 nearly closed the lid on new issuance.
"We're just not involved anymore," said one informed source at First Tennessee.
Market sources expect U.S. CLO deals to follow European rules that require CLO managers retain 5% of the structure. That, along with other growing regulations and requirements, may permanently prevent some managers from returning to the landscape, sources said.
"This would probably price smaller managers that don't have a lot of capital out of the market," one source said of the 5% risk retention.
Deals in pipeline
In the primary market, Ares Management LLC's €300 million Ares European CLO VI Ltd. transaction remains in the pipeline, according to informed sources.
Also on the calendar, Credit Suisse Asset Management, LLC plans to sell €309.26 million in the Cadogan Square CLO V BV deal,
Other European CLO deals are in the works from GSO Capital Partners LP, 3i Debt Management and Pramerica Investment Management Ltd., according to market sources.
Total issuance in July is expected to slow as vacation season takes hold with $4 billion to $5 billion forecast, informed sources said.
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