Bank of New York Mellon Corp. pulled the sale of its Alcentra unit, which manages $17 billion of loans and high-yield bonds, according to three people with knowledge of the plan.
The world's biggest custody bank had hired Credit Suisse Group AG to run the sale of the group that manages the majority of its assets in collateralized loan obligations in the U.S. and Europe, said the people, who declined to be identified because the terms are private.
More than $54 billion worth of CLO contracts have been sold in the U.S. since the beginning of 2010 as bigger managers buy up smaller rivals while issuance of the securities remains low, according to data compiled by Barclays PLC. On Aug. 31, BNY Mellon announced its chairman and chief executive, Robert P. Kelly, had stepped down. The change was because of "differences in approach to managing the company," according to BNY Mellon.
"I expect the industry consolidation to continue for at least another year, with the smaller managers either just running off after the end of the reinvestment period or being absorbed by the larger players," Justin Pauley, a CLO analyst at Royal Bank of Scotland Group PLC in Stamford, Conn., said in a telephone interview Monday.
The "vast majority" of European CLOs will wind down in the next three years, according to a report published last month by Standard & Poor's. Funds worth 69 billion euros ($94 billion) of assets will end their reinvestment period and wind down by 2015. David Forbes-Nixon, Alcentra's chairman, and Jack Grone, a Credit Suisse spokesman, declined to comment. Mike Dunn, a BNY Mellon spokesman, said the company does not comment on rumors or speculation.
CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.
Alcentra, which became a subsidiary of BNY Mellon in 2006, is 95.5% owned by the bank and 4.5% by employees, according to its website.
Kelly, who led BNY Mellon since 2007, left by "mutual agreement" with the board, it said. His successor is Gerald L. Hassell, who has been president of the company since 1998.
Highland Capital Management LP, a Dallas debt manager with about $23 billion of assets, has put its business that manages CLOs in Europe back up for sale after taking it off the block earlier this year. Rothschild, the family-owned financial advisor, agreed last month to take over Elgin Capital LLP and Ares Management LLC, a Los Angeles investment firm, agreed to buy Indicus Advisors.
Citi Capital Advisors acquired four CLOs worth $2 billion from DiMaio Ahmad Capital LLC in August. Apollo Global Management LLC in July said it agreed to acquire Gulf Stream Asset Management, which manages 10 CLOs.
There have been more than $7 billion of CLOs backed by widely syndicated loans issued in the U.S. this year, according to Bloomberg News data.
There was only one fund-managed CLO in Europe this year for 858 million euros ($1.2 billion), the data shows.
The spread on triple-A slices of CLO debt in the U.S. at Aug. 11 was 200 basis points more than the London interbank offered rate, according to Morgan Stanley data.
In Europe the spread for the same rated debt was 275 basis points more than the benchmark.
