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European CLO primary activity expected in weeks ahead; oil, gas prices impact CLOs
By Cristal Cody
Eureka Springs, Ark., March 8 – Some European CLO deal activity is expected in the weeks ahead after a quiet start to the year, according to a market source on Tuesday.
A handful of deals are being marketed.
Year to date, €825 million of European CLOs have priced in two deals, according to Prospect News data.
Market analysts forecast as much as €15 billion of CLO issuance in 2016.
Volatility, looming risk retention rules and low oil prices have weighed on volume.
“Falling oil has had widespread impact on markets and the CLO market is no exception,” according to a note from Deutsche Bank Securities Inc. analyst Bjarni Torfason.
CLO managers with the highest oil and gas exposure in post-crisis CLOs includes Silvermine Capital Management LLC, Seix Investment Advisors LLC, Allianz Global Investors U.S. LLC, Highland Capital Management, LP and Regiment Capital Management LLC, according to Torfason.
“Given how much oil and gas loans have fallen, they have caused significant mark-to-market losses in the CLOs with most exposure to the sector,” he said.
CLO managers that have reduced their average oil and gas exposure the most are Angelo, Gordon & Co., H.I.G. WhiteHorse Capital, LLC, Palmer Square Capital Management LLC, Black Diamond Capital Management, LLC, Kingsland Capital Management, LLC and Octagon Credit Investors, LLC.
“Since the woes of oil and gas have grown, managers have on average trimmed their exposures to the sector,” Torfason said. “Looking at the 2.0 broadly syndicated loan CLOs that were outstanding at the end of 2014 and were still outstanding at the end of February 2016, we see that the average CLO has reduced the exposure to oil and gas by just under half a percent.”
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