The collateralized loan obligation market is seeing increasing frequency of deals from repeat issuers such as Silvermine Capital Management and new managers entering the space. Silvermine is raising a $400 million CLO via Citigroup, having priced its last deal in early April. Meanwhile, AEGON USA Investment Management priced its inaugural cash-flow CLO this week, also via Citigroup, selling its AAA-rated liabilities in line with recent tights even though it is the manager’s first foray into the sector.
Managers and arrangers have said that a managerial track record in the CLO space is a major component of success in pulling off a deal as the market recovers, since CLOs are actively managed structures. But some apparently new groups that have hit the market with deals, such as AEGON USA—the U.S. investment and management unit of insurance, pension and asset management firm AEGON—have been more than just “two guys and a Bloomberg terminal”; a phrase often used to describe some managers that came to market before the financial crisis of 2008.
“Some managers may appear to be new to CLOs, but then you scratch the surface and find out who they are then it makes sense as to how they can access the capital markets," Kevin Kendra, head of U.S. structured credit at Fitch, told SI. AEGON, in particular, has an experienced leverage loan team, which helps to offset management risk, according to Fitch.
AEGON also retained the C, D and subordinate notes, helping to attract investors to the AAA liabilities, according to market players. The top-rated portion was sold at 130 basis points over LIBOR.
But the market is likely to remain skeptical of new names, according to some. “If you were in any of the debt tranches of any of the well-performing managers [during the financial crisis of 2008], you’re very happy with your investment,” said Matthew Natcharian, managing director and head of structured credit investments at Babson Capital Management, which manages $8.3 billion in cash-flow CLOs, at a industry roundtable in April.
Babson reviewed 253 deals and 43 managers, finding that manager results ranged from a seven point gain to a nine point loss. The CLOs reviewed were originated between 2004 and 2007, and the analysis measured performance to Feb. 15, 2012.
The Week In Deals
In total, three CLOs representing $1.18 billion priced last week, with deals from managers Sankaty Advisors, Golub Capital and AEGON.
The deals were marketed by the two top bookrunners in the U.S. CLO market, Citigroup, which raised the deals from Sankaty and Golub in the first two days of May, and Bank of America. BofA has been bookrunner on $3.80 billion in CLO transactions this year, including one deal it did alongside Morgan Stanley, according to SI’s Deal Flow Chart. Citigroup has been sole bookrunner on $3.19 billion in deals.
For pricing and other info on this week’s deals, see the CLO Pipeline.