GSO ends 2016 with streak of CLO issuances

Management cited a commanding performance in 2016 and is optimistic about impending US policy changes.

GSO Capital Partners ended 2016 with a robust pace of collateralised loan obligation and posted double-digit gross returns for the year in its performing and distressed credit strategies, the firm said on Thursday (26 January).

Blackstone’s credit arm launched five CLOs for the fourth quarter, totaling $2.6 billion. It ended the year with $4.8 billion worth of issuance across nine new CLO, management said on its latest earnings call.

“The nine issuances last year and the pick-up in fourth quarter just reinforces our CLO leadership position in the US and Europe,” Michel Chae, chief financial officer at Blackstone, said on the call.

He added that these numbers place GSO as the top CLO issuer for the fourth year in a row and that there is a “good market at the moment for those vehicles”.

The New York-based firm raked in gross returns of 22.6 percent in performing credit and 17.5 percent in distressed credit over the entire year, according to the annual report released alongside the call.

Gross returns rose the last quarter for both groups, up 4.7 percent and 6.4 percent for performing and distressed credit, respectively.

The report attributed this performance to the “appreciation of energy investments and distressed debt positions across funds”.

The firm’s total credit assets reached a firm high of $93.3 billion, up 18 percent year- on-year, from $79.1 billion at the end of 2015. The credit segment's annualised economic income totaled $4.1 million for 2016.  

Over the fourth quarter, GSO raised a $2.9 billion for a co-investment fund intended to invest parallel with the $6.5 billion mezzanine fund. The fund closed its GSO Capital Opportunities III last quarter at its hard-cap, marking the Blackstone credit arm’s largest fundraise for a direct lending drawdown fund yet, as Private Debt Investor previously reported.

Over all of 2016, the credit segment deployed $5.7 billion in capital, including $3.3 billion in LP commitments. GSO invested or committed $3.1 billion during the quarter, ending the year with $21.3 billion in dry powder.

Stephen Schwarzman, Blackstone’s chairman and chief executive officer, said on the call that potential changes in US policy from President Donald Trump and a Republican-controlled Congress have created a “good deal of anxiety” in the market. He cited a multitude of issues, including trade and immigration, two issues central to Trump’s candidacy.

Schwarzman stressed that his firm remains “quite optimistic about our prospects” and added that the new government’s “pro-growth posture” could be an “opportunity for everyone to benefit”.

As part of that stance, the new government is targeting a growth rate that is double the average rate over the Obama administration’s years, he added, a level of GDP expansion that could extend the business cycle and greater capital inflows to the US.

Blackstone’s total assets under management increased 9 percent year-over-year to $366.6 billion, up from $336.4 billion the same period last year, according to the report.