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Bemoaning the quality and volume of loan supply has become almost second nature for loan portfolio managers. But there is a sense that this time, there really is a dearth of suitable assets for CLO managers to pick from.
“We’re in danger of being the boy who cried wolf, but there’s no doubt that there is a build up of pressure in the loan market,” said one CLO portfolio manager.
Too much cash chasing too few deals. Again.
GoldenTree went as far as returning cash to some investors from a 2020-vintage CLO after determining that over 20 days, it was unable to identify appropriate assets to invest in.
There are caveats to this. GoldenTree Loan Management EUR CLO 4 is out of reinvestment, so the pressure to put money to work is lower than for a reinvesting CLO. Furthermore, later-life CLOs such as this one find it increasingly challenging to source loans that meet tightening reinvestment criteria as the clock continues to tick.
Still, this feels like it's symptomatic of pressure building in the loan...
