03/23/2012

Buoyant Mood Draws Crowd to CLO Summit

Collateralized loan obligation professionals are buzzing about a conference that is shaping up as the largest-ever gathering of players in their sector.

Information Management Network’s “CLO and Leveraged Loan Conference,” scheduled for March 26 at the Marriott Downtown hotel in New York, already has attracted more than 750 registrants. When all is said and done, 800-plus people are expected to attend.

In fact, IMN said on March 21 that the event already had reached capacity and that any new registrations would be placed on a waiting list. Those already signed up include a host of CLO buyers, managers, underwriters and traders, along with their counterparts in the leveraged-loan market. Among issuers, for example, Highland Capital, McDonnell Investment and Silvermine Capital will be on hand to pitch their first deals in several years.

IMN organizers noted that several of the CLO industry’s most active managers also registered in the days after plans for the conference were unveiled in October, despite turbulent market conditions at the time. However, interest has especially picked up since Jan. 1 as the issuing outlook has improved — with many hoping to use the event as a dealmaking venue.

Investors are on board with that idea, as they look to CLOs to boost returns in today’s low-interest-rate environment. They’re also seeking more exposure to leveraged loans — with protections afforded by the senior-subordinate CLO structure.

The conference is IMN’s first devoted entirely to CLOs and leveraged loans. The company used to host annual summits in the U.S. and Europe focusing on the broader market for collateralized debt obligations and credit derivatives, but called off the annual series after a disappointing turnout in 2008. Even at their largest, those events only drew about half the number of people expected to show up Monday.

The attendance stampede coincides with surging activity in the CLO sector. Already this year, issuers have completed $4.7 billion of such deals worldwide, according to Asset-Backed Alert’s ABS Database. Projections are that full-year volume could reach $25 billion, up from $13 billion in 2011.

Still, that would be a far cry from the pre-crisis peak issuance of $121 billion in 2006. Lower-than-expected leveraged-loan volume also could put a crimp in the pipeline, as CLO managers are forced to pay more for collateral. Average bids for the largest syndicated loans in the U.S. currently stand at 93.7 cents on the dollar, up from 91.1 cents at the beginning of the year, according to the S&P/LSTA U.S. Leveraged Loan 100 Index.

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