There has been talk of two new CLO syndications in the last week or so.
One, from Guggenheim, is said to target $600mm in size with half in the $300mm AAA tranche, but Guggenheim is retaining the mezz and equity tranches. It will be interesting to watch a) the pricing on the AAA notes and b) whether the deal is for large cap loans or mid-market. As far as I know, Guggenheim's previous CLOs have been m
The other, from GSO (Now an arm of Blackstone), is smaller at $400mm but possibly more interesting because at least some of the equity is being syndicated.
What do people think of the outlook for new issuances in the CLO/CBO space? There's still a lot of value to be found in older vintage CLOs, and most CLOs performed as designed during the downturn.
http://www.bloomberg.com/news/2010-09-16/Citigroup-said-to-be-marketing-part-of-600-million-clo-led-by-Guggenheim.html
I've worked on several of the CLO issuances where Guggenheim has been the main investor; while the originator of the underlying syndicated loans has been a MM Asset Manager. It'll be very interesting to see where the CLO issuance market goes from here. I've had the luck of working and being the lead on my end on the past 3 or 5 CLO transactions that have came to market.
All the debt that has been issued will eventually have to be securitized to effectively have the U.S. economic engine work and not lock up. You're absolutely correct regarding the performance of these products - the Junior and Senior OC ratios have been improving drastically over the past year, resulting in O/C cures leading more interest and principal proceeds to be flush down the waterfall, less EOD (event of defaults), improving pricing on syndicated loans (almost back to pre-crisis level) - correlated to lower spreads (indicating perception of less risk), collateral defaults decrease (U.S. still higher than European assets; however, between 3-5% Far better than the 5-7% we were seeing at the peak in mid-09, improving cash positions.
CDO's will have a difficult time returning; however, CLO's are poised for new issuance. Remember CDO structure is very impressive and functional; however, if the underlying collateral is garbage, then the product will perform as such (i.e. sub prime mess aka HUDSON CDO from Goldman or the thousands of others filled with junk).
One interesting tidbit - at an asset manager conference, an investor was complaining about the performance of legacy CDO's/CLOs. The Asset Manager had a great response to his comment - paraphrasing 'You - the investor has pushed me - the Asset Manager to obtain junk status/below investment grade securities to help juice your returns because even though I have a strong track/performance record for the past 20+ years - you've gone to new asset managers that have virtually no experience that are showing high rate of return using below investment grade products - how else where we able to compete?' === This provides some insight into how investor demand created such lack luster, under performing products when the overall mechanics of the product are fundamentally strong.
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