CLO NEWSLETTER - Sutherland Global Services

Compelling case for CLO calls
May 16, 2013; Source: Structuredcreditinvestor.com
Equity investors in callable 2010 and 2011 CLOs should call them now and take advantage of the low current funding costs in the
new issue market, suggest CLO strategists at Morgan Stanley. Many holders of legacy deals would also benefit from exercising call
options, although continuing to hold 2006 and 2007 vintage CLOs could offer greater value.
Twenty transactions have been called this year and a further 42 were called in 2012. Of those 62 deals, five are early CLO 2.0
transactions from 2010 and 2011.
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Chart: BB/B leveraged loan bids continue to climb
May 16, 2013; Source: LeveragedLoan.com
Secondary bids on double-B and single-B rated loans topped par early this year,
and have been rising ever since. One big reason: the continued flood of
institutional investor cash into loan mutual funds (there have been 47
consecutive weeks of inflows), which totals $18.9 billion so far in 2013.
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Shift seen in Euro loan maturities
May 15, 2013; Source: Structuredcreditinvestor.com
S&P's updated study of collateral pools backing European cashflow CLOs finds that the peak in leveraged loan maturities has shifted
out to 2016 and 2017, from 2014 and 2015 in its previous study two years ago. One likely reason for this outward shift in loan
maturities is that much existing CLO documentation allows collateral managers to continue reinvesting in certain circumstances,
even after the reinvestment period has ended. Despite the transaction entering its amortisation period, CLO managers may
therefore continue to recycle some principal proceeds by investing in assets with longer maturities in order to keep the CLO
invested.
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After torrid start in 2013, CLO issuance eases; YTD volume: $32.1B
May 15, 2013; Source: LeveragedLoan.com; By : Steve Miller
After a record-setting first quarter, CLO issuance has downshifted noticeably.
Indeed, during the four weeks ended May 15, CLO volume averaged
$897 million per week, less than half the $1.9 billion weekly issuance seen in
January and February. Year-to-date CLO issuance now totals $32.1 billion.
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CLO Investors Should Heed Loan Maturity Extension Risk, S&P Says
May 14, 2013; Source: Businessweek.com; By : Patricia Kuo
Investors in European collateralized loan obligations should be wary of risks from deals extending the maturity of the buyout debt
underlying the securities, according to Standard & Poor’s.
Some of the so-called amend-and-extend transactions leave leveraged loans due to repay after the maturity of the CLO notes,
which may mean investors in the notes aren’t repaid on time, S&P analysts led by London-based Emanuele Tamburrano wrote in a
report today.
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