Leveraged loans and collateralized loan obligations took a cue from the high-yield bond market and skipped their traditional summer siestas.
Leveraged loan volume topped expectations and produced the busiest August on record. Banks arranged $27.7 billion of non-investment-grade loans for syndication to institutional investors last month, according to Thomson Reuters LPC.
Strong technicals, benign macroeconomic conditions and demand from investors each played a role in the robust volume.
New CLOs continued to be a driving force on the demand side, with summer CLO issuance also surpassing expectations.
During the last two weeks of August, five CLOs totaling roughly $2.55 billion priced, including the largest broadly syndicated deal of the year and a unique transaction with a 40% bond bucket. That brought total 2012 volume to $26 billion — or more than double the $12.5 billion issued last year, according to Royal Bank of Scotland analysts.
Ares Capital priced the year's largest broadly syndicated deal, a $719 million CLO, on Aug. 29, via arranger JPMorgan Chase (JPM). The transaction followed a $413 million offering from Columbia Asset Management, arranged by Citigroup (NYSE: C) on Aug. 28.
The previous week GoldenTree Asset Management printed a $590 million CLO, via Bank of America's (BAC) Merrill Lynch unit, that can invest as much as 40% in corporate bonds, second-lien loans or unsecured loans. A $404 million transaction from Alcentra and a $415.8 million deal from BlackRock occurred that same week.
Triple-A pricing on this most recent batch of CLOs has hovered around Libor plus 150 bps, except for the GoldenTree deal which hit 250 bps because of the large allocation to unsecured assets, roughly four times the usual 5% to 10% maximum.
In addition to robust volume, 2012 has seen a notable increase in the number of CLO managers that have printed new deals. Better access to open-market equity and warehousing lines has allowed a broader number of players into the game. Forty-three managers have inked a deal this year, the most since 2007, and up from 28 in all of last year, according to Standard & Poor's Capital IQ LCD.
Managers that completed deals during the first half of August include ING Asset Management, Halcyon, Symphony, American Capital Strategies, Highbridge, Franklin Advisers and TICC Capital.
It appears that, if there are no severe macroeconomic hiccups and demand for triple-A paper continues to improve, 2012 is well within reach of the high end of earlier predictions and could see $30 billion of CLO issuance.
This article first appeared on leveragedfinancenews.com.