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Capital Markets

CLOs: High-yield boom fuels secondary loan liquidity

Cash from HY refinancings; New US CLO deals emerge

Although bankers have been talking for some time about the improved sentiment in the leveraged loan market, the marketing of two new CLOs in the US at the beginning of May is the first clear sign that institutional appetite for this type of structure has returned.

The deals are a $300 million transaction for private equity house Apollo, arranged by Citi, and a $500 million CLO for San Francisco-based Symphony Asset Management, which is owned by Nuveen Investments. They follow on from the signing of a new $525 million CLO for Fraser Sullivan Investment Management at the end of March, a deal in which new triple-A paper priced at 190 basis points over Libor, with the double and single As coming at 225bp and 250bp.

The Fraser Sullivan deal is, however, understood to involve the rolling over of callable debt from a US insurance company that was raised in January 2009. The two new transactions might therefore provide a more accurate reflection of the appetite for new CLO paper in the present environment.

Hints of health

Two swallows do not make a summer but renewed CLO activity is an important indicator of the loan market’s return to health.

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