The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Leveraged loans: Arb windfall for cash CLOs

Repricing in the leveraged loan market means that some CLO managers have been having a field day.

There were not many people in the debt markets with smiles on their faces at the end of August but a few CLO managers were managing to raise a grin. Having long lamented the spread compression in the leveraged loan market that was destroying their arbitrage, Christmas came early for some asset managers in July when spreads on senior loans blew out from around 225 basis points to 300bp. When you have locked in term funding at historically tight levels but not yet invested and asset margins suddenly blow out by 30% it must be hard to stop grinning.

The speed with which leveraged loans have changed from a seller’s to a buyer’s market is quite breathtaking – it seems just a matter of weeks since buyers were grumbling about covenant-lite documentation, and they can now practically write their own terms.

Those managers that had launched relatively recently and were still sitting on reasonable cash balances in August were best positioned to take advantage of the situation. According to Deutsche Bank, some European CLOs had sizeable percentages of assets still to be purchased at the time: Wood Street (40%), Cordatus II (35%) and Avoca VIII and Gresham Capital with 30%.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree