Asset managers have established near-record warehouse facilities to purchase discounted leveraged loans for new collateralized loan obligations. The opportunity arises as market selloffs have spread beyond lower-rated assets to encompass higher-quality debt, leaving roughly 85% of loans trading below face value. Although year-to-date issuance is down more than 16%, recovering quarterly returns on risky equity tranches are helping rekindle demand. However, fund managers still face the delicate task of screening for default risks in disrupted industries like cable television.
Key points
Expanding market selloffs into higher-quality loans allow asset managers to capture wider…: Expanding market selloffs into higher-quality loans allow asset managers to capture wider margins and attractive yields.
Rebounding collateralized loan obligation equity returns are incentivizing major firms to…: Rebounding collateralized loan obligation equity returns are incentivizing major firms to resume structured vehicle packaging.
Investment managers must carefully navigate heightened default risks in vulnerable sector…: Investment managers must carefully navigate heightened default risks in vulnerable sectors such as cable television.
Sources checked by our analysis pipeline: 1
(Bloomberg) -- Carlyle Group Inc., KKR & Co. and Oaktree Capital Management are among the money managers hoping to pounce on US leveraged loans increasingly selling at bargain prices.
The three firms are considering buying loans and packaging them into bonds known as collateralized loan obligations, according to people with knowledge of the matter. Many other fund managers are looking at doing the same: They’ve set up a near-record number of short-term lines of credit, known as warehouse lines, to purchase loans for CLOs, with about 286 open as of last count, according to strategists at Barclays.
“The opportunity is getting a little more exciting,” said Dagmara Michalczuk, co-chief investment officer at Tetragon Credit Partners, which invests in CLO equity. “A lot of folks are deciding to pull the trigger at the moment.”
Loans are relatively cheap now. More than 90% were trading at a discount to face value earlier this week, a higher share than any time in almost 18 months, according to strategists at JPMorgan Chase & Co. Later this week, that figure edged closer to about 85%,…
Company funds were deployed to replenish the vast majority of the stolen assets following a complex multi-point security compromise linked by investigators to North Korea. The incident triggered a broad decline in cryptocurrency market prices and prompted a federal inquiry involving the FBI. Normal platform operations are moving closer to restoration, with suspended customer withdrawals on track to resume Sunday.
Indian authorities have recalibrated overseas fuel duties for the upcoming fortnight to manage local supply security amid volatile global energy markets. The adjustments target refining margins on middle distillates while completely eliminating outbound levies on motor spirit. Domestic retail pump prices will remain unaffected because domestic excise duties were left untouched.
A massive cyberattack on Binance resulted in the theft of $6.3 billion in client assets, making it the largest heist in the industry's history. Investigators suspect North Korean state-backed hackers orchestrated the unprecedented breach. The incident has intensified global scrutiny on digital asset security and amplified demands for stronger regulatory oversight to safeguard investor funds.