CLO investors seek refuge

Which company has seen the most “buys” in Europe’s collateralised loan obligation market over the last 90 days? It’s Nielsen Holdings – a New York-listed, global market research firm operating in 100 countries, with around three-quarters of its revenues accounted for by long-term contracts. In sum, a “relatively stable credit”, according to Sandeep Chana, a director of structured credit at S&P Global, in the firm’s “What’s next for European CLOs?” webinar (registration required).

And which has seen the most “sells”? That would be Swissport, the cargo and airport ground handling firm, which has seen its business severely impacted by the steep downturn in air travel and a recovery that has only been patchy. The firm, which is seeking a UK scheme of arrangement and US Chapter 15 filing as it seeks to restructure its loans, could face “a tricky two to three years”, said Chana.

This speaks to a flight to safety as investors seek refuge from the ravages of the global pandemic. Unsurprisingly, sectors such as healthcare and telecoms are in demand – others, such as retail and entertainment, less so.

What they think of Apollo/Mubadal 
More on the $12 billion tie-up between fund manager Apollo and sovereign wealth fund Mubadala, as we heard from a couple of market sources on what they thought of Apollo’s move into the broadly syndicated loan market.

In the past few years, there have been “more entrants with more prominent platforms with scale to start to disintermediate the broadly syndicated loan market”, says Jeff Topor, a director at research and investment due diligence firm Cliffwater who leads its coverage of private debt. During times of dislocation and volatility, having this kind of heft can be a “good value proposition”, he says, with the biggest driving force for sponsors to perhaps pay up for such loans “to get a deal done fast and provide certainty”.

Suhail Shaikh, head of US direct lending at Alcentra, viewed the move as “seemingly a continuation” of Apollo’s current strategy. “The size is notable” and “it will take some market share away from the banks,” he said. “Direct lending is definitely displacing some portions of the traditional broadly syndicated loan market.”

Meanwhile, Robin Blumenthal got word from Apollo that the firm is adding 15 more people to its 70-strong corporate credit team by the middle of next year.

It’s not all about distress 
Some key findings from the second quarter 2020 edition of SRS Acquiom’s Barometer, which tests the views of direct lenders, bankers, advisors and lawyers on the state of the distressed debt and lending markets:

1. There was a rebound in non-distressed lending by the end of the second quarter, with nearly 60 percent of those canvassed looking for opportunities at the end of June, compared with just over 50 percent in May.

2. There was a big shift to senior secured loans by the end of Q2, with 80 percent closing such facilities, up from 45 percent in May. Second lien loans doubled to 30 percent, while debtor-in-possession (DIP) facilities went down from 60 percent to 51 percent.

3. There was a drop in preparations to file for bankruptcy, with 43 percent of respondents seeing this happen in June, compared with 57 percent in May.

Data snapshot