Sector developments and company hires

CLO structures reviewed
Post-Covid crisis US BSL CLO structures differ in a range of ways from their predecessors, beyond shorter reinvestment periods, according to a new report from S&P.

“We reviewed a sample of almost 40 US BSL CLOs that closed in Q2 and Q3, and compared their portfolio metrics (as of the start of Q4) to the statistics in the CLO Insights 2020 Index,” the rating agency says. “Because the index includes only CLOs that closed before 2020, this gives us a good overview of the differences between the deals issued since Covd-19 began and those issued earlier.”

By the start of Q4, the credit quality of the portfolios of the newer deals was notably better than that of the Index. Triple-C buckets represented less than 3% for the newer deals, while exposure to single-Bs and above was significantly higher.

S&P also found that the newer deals have higher average exposure to issuers within the software, telecom and insurance industries (5.5% higher than the Index). However, they have lower average exposure to the sectors that have been more directly negatively impacted by Covid-19 so far (hotel/restaurant/leisure, entertainment, retail, energy and auto components: 4.3% lower than the Index).

In addition, newer CLOs have less exposure to smaller corporate issuers. Overall, S&P concludes: “The new issuance CLO market continues to evolve, with CLO structures returning to the levels seen before Covid-19.”

In other news…

Acquisitions
Alantra AM has acquired a 49% stake in Indigo Capital, a pan-European private debt asset manager. Based in Paris, Indigo specialises in SME financing through a combination of private bonds and preferred equity. Since inception, the firm’s seven investment professionals have completed over 50 investments for a total value of more than €800m across France, Italy, the Netherlands, Switzerland and the UK.

Lazard Asset Management (LAM) has expanded its alternative investment platform, with the addition of a New York-based team and its long/short credit strategy. Sal Naro, Vincent Mistretta, Michael Cannon and Sanjay Aiyar have joined LAM from Coherence Capital Partners, forming the Lazard Coherence investment team. The Lazard Coherence Long/Short Credit Strategy actively identifies long and short bond positions, focusing on North American and European investment grade, cross-over and high yield fixed income markets.

Hearing due for Hertz DIP deal
Hertz Global Holdings has secured commitments for debtor-in-possession (DIP) financing totalling US$1.65bn and has filed a motion for approval of the financing by the US Bankruptcy Court for the District of Delaware. The proposed DIP financing will support the company as it moves through the next stage of its Chapter 11 process.

The financing is to be provided by certain of the Hertz's pre-petition first-lien lenders and is expected to be structured as a delayed draw term loan debtor facility. Up to US$1bn can be used to provide equity for vehicle acquisition in the US and Canada, while up to US$800m can be used for working capital and general corporate purposes.

A court hearing is scheduled for 29 October. Moelis & Co is serving as Hertz’s investment banker, FTI Consulting is serving as its financial advisor and White & Case its legal advisor.

Trade finance ABS closed
Standard Chartered has closed Prunelli Issuer I Compartment 2020-1, a rare revolving US$1.45bn securitisation of trade finance exposures granted to corporates and financial institutions. Rated Aaa/AAA by Moody’s and Scope, the pool is diversified geographically - with sizeable portions from Singapore, China, Hong Kong and India - but has a significant concentration (51%) in the banking industry.

The transaction’s initial 12-month revolving period can, subject to certain conditions, be extended up to three times for a subsequent 12 months. The revolving period can be terminated upon the occurrence of a stop revolving event.

The assets have short tenors, with a weighted average life covenant of 91 days, and the portfolio will amortise quickly after the revolving period.