The real estate investment trust formed Apidos CLO-VIII in June and began “warehousing” loans through an agreement with the bank, Christopher Allen, chief operating officer of Apidos Capital Management LLC, said on Resource Capital’s second- quarter earnings call. New York-based Apidos is a unit of Resource America Inc.
“The new-issue CLO market is becoming much more attractive,” Allen said, according to a transcript of the call. “For the first time in several quarters secondary loan prices have declined in price while liability spreads have remained tight.”
Resource Capital intends to purchase the majority of the equity in the CLO and the firm has received “significant” inquiries from potential investors, according to the transcript. 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.
There have been $6.6 billion of CLOs backed by widely syndicated loans raised this year, according to data compiled by Bloomberg.
In February, New York-based Resource agreed to purchase Churchill Pacific Asset Management LLC, according to a Feb. 15 news release.
“We believe that the trend of manager consolidation will continue and that Resource Capital will be a major beneficiary,” Allen said on the call. “We regularly review additional acquisition candidates.”
U.S. leveraged-loan prices dropped to 93.86 cents on the dollar yesterday, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index. That’s the lowest since Jan. 7. Loans have returned 1.6 percent year-to-date.
The highest-graded portion of CLOs, those pieces rated AAA by S&P, were paying a spread of 180 basis points more than the London interbank offered rate June 30, according to Morgan Stanley data. The margin had widened to as much as 725 basis points in April 2009, according to the bank. Libor is a rate banks charge to lend to each other. A basis point is 0.01 percentage point.
Purvi Kamdar, director of marketing and investor relations at Resource America, didn’t return a telephone call seeking comment.
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