CLO Pros to Huddle Over Loan Shortage
A lack of fresh assets and continuing regulatory pressures will take center stage at this year’s biggest collateralized loan obligation conference.
Information Management Network’s “Investor’s Conference on CLOs and Leveraged Loans” takes place May 24-25 at Conrad New York hotel. Some 1,400 people are expected to attend, roughly matching the headcounts tallied in recent years.
The conference agenda departs from earlier versions by including more panelists from leading leveraged-loan syndicators, as opposed to professionals directly involved in CLOs. That change is a nod to a continuing shortage of fresh loans, which has suppressed the production of new deals this year.
“Loan supply is the big question on everyone’s mind, so we very much want to push things beyond the CLO discussions you might have heard” at IMN’s ‘ABS East’ conference or ‘SFIG Vegas,’ the main-event it co-hosts with the Structured Finance Industry Group, organizer Jade Friedensohn said. “This is the event to get into the weeds.”
Indeed, the CLO summit starts with a panel on the outlook for the leveraged-loan market. Speakers will include Peter Acciavatti, a high-yield debt analyst at J.P. Morgan; Doug Antonacci, head of leveraged-loan sales at Bank of America; and John Gally, who co-heads leveraged-loan and high-yield bond trading at Morgan Stanley. Also on the panel is Barings CLO portfolio manager Adrienne Butler, along with Kevin Kendra of Fitch and Steve Wilkinson of S&P.
Another panel will focus on the quality of loans to retailers, the falling fortunes of which have caused jitters in the market.
Leveraged-loan volume in the U.S. totaled $427 billion during the January-April period, up from $204 billion a year earlier, according to Thomson Reuters. But with some 75% of the originations actually refinancing existing debt, and mutual funds snatching up much of what remains, CLO issuers have had trouble getting their hands on fresh collateral.
What few loans they have bought, meanwhile, typically have come at high prices.
The upshot has been a rush by managers to maintain their profits by refinancing CLOs whose original yields exceed current market levels — another high-profile topic at IMN’s conference. Nearly $75 billion of such refinancings have taken place this year, according to J.P. Morgan. That compares to $25.9 billion of new offerings, according to Asset-Backed Alert’s ABS Database.
Conferencegoers additionally will be looking for indications of whether the Trump Administration will follow through with promises to relax financial-market regulations. On that front, they especially plan to discuss the possibility that the Dodd-Frank Act’s risk-retention rule might be rolled back. Such a move could help ease periodic trading slowdowns like one currently taking shape (see article on Page 2).
Also sure to attract attention is a report by Bloomberg that Treasury Secretary Steven Mnuchin had ordered the Federal Reserve, SEC, FDIC, Commodity Futures Trading Commission and Comptroller of the Currency on May 8 to re-examine permitted activities under Dodd-Frank’s Volcker Rule. A relaxing of those controls could prompt banks to increase their CLO-trading activities, perhaps dealing a blow to smaller broker-dealers that increasingly have been moving into the market (see article on Page 10).
The emphasis on regulations is reflected in IMN’s choice of Patrick Pinschmidt to deliver the conference’s May 24 keynote address. As a Treasury official in the Obama Administration, he was the first executive director of the Financial Stability Oversight Council.
A panel on Asia-based investors is on the agenda as well, at a time when a mix of buysiders in China have considered entering the market. The list of speakers includes Helen Remeza of investment firm Fosun International and Asif Khan of MUFG.
IMN’s conference started in 2012 with 700 attendees and grew rapidly before its headcount leveled off in recent years. Opal Group’s rival “CLO Summit 2016” attracted about 1,000 industry professionals to the Monarch Beach Resort in Dana Point, Calif., on Dec. 4-6.