Evergreen CLO blocks pipeline

By Faro Ipoll

Thursday, April 01, 2021

The CLO primary pipeline has been thrown into chaos, with managers waking up this morning to find a massive stupid deal blocking the way.

Evergreen CLO I, whose manager cannot be named out of sheer embarrassment, is going nowhere in a hurry after its warehouse slipped underwater, thereby triggering a drawstop. But neither are the gazillion other CLOs - most of them US resets and refinancings - that are backed up as a result. Prolific issuers with at least 30 deals apiece ready to go next week, are said to be particularly miffed.

"It's not our fault," said the manager in a statement. "Visibility on pricing was poor. First we went tighter and then wider and now we're just wedged sideways."

But according to some CLO investors this was an accident waiting to happen. "Triple Bs have just been getting fatter and fatter. What we've ended up with is a veritable triple-B fatberg."

The manager is discarding the CLOs double-A fixed rate notes and replacing these with floaters in order to rectify the situation. “That should do the trick,” says the CLO’s skipper.

Links in name between the CLO and the big stupid ship that recently blocked the Suez Canal are entirely coincidental. But Banque Indosuez, established to finance the Suez Canal's construction, has played a major role in the growth of CLOs, producing a generation of star CLO business builders who have gone on to work for some of the biggest names in structured credit.

"Who would have thought it would all come to this?" one of these industry stars lamented to Creditlfux. "First we see global trade absolutely stymied for a week in a bloody great bonanza for meme creators. And now we have to go get out the digger for this."

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