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CLOs: The living dead

A stream of new CLOs is hitting the market – but it is far from business as usual.

Although banks in Europe are proving far less prepared than their US counterparts to sell off the backlog of leveraged loans that they have been left with after the summer, which amounts to $100 billion (see feature page 98), a steady stream of CLO deals has been hitting the market on both sides of the Atlantic. In the US there have been new deals for Halcyon Structured Asset Management, Highland Capital, Symphony Asset Management, Stanfield Capital Partners and Pimco, and in Europe €1.8 billion-worth of CLO trades priced in one week in November. Deals have been launched for Lightpoint, Alcentra, ICG, Permira, Carlyle and Harbourmaster.

Artificial prices

However, things are far from back to normal and many question the levels at which these deals are getting done. "The headline bond volumes and coupons may not be all that instructive of the true extent to which new issues are being placed with end investors and at what prices," says Ganesh Rajendra, head of European ABS research at Deutsche Bank in London. Others put it more bluntly: "The deals that we are seeing printed are the ‘walking dead’," says one asset manager. "People are clearing warehouses and there is no indication what the underlying cost is.

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