Bank of New York Mellon Corp. (BK) 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 hired Credit Suisse Group AG (CS) 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. Bank of New York announced Aug. 31 that its Chairman and Chief Executive Officer Robert P. Kelly had stepped down due to “differences in approach to managing the company,” according to a news release.
“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, Connecticut, said today in a telephone interview.
CLO Reinvestment Period
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 chairman, and Jack Grone, a Credit Suisse spokesman, declined to comment. Mike Dunn, a Bank of New York spokesman, said the lender doesn’t 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 Bank of New York in 2006, is 95.5 percent owned by the bank and 4.5 percent by employees, according to its website.
Kelly, 57, who led Bank of New York since 2007, left by “mutual agreement” with the board, the lender said in the statement. His successor is Gerald L. Hassell, 59, who has been president of the New York-based lender since 1998.
Highland European Sale
Highland Capital Management LP, the Dallas-based debt manager with about $23 billion in assets, 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 adviser, agreed last month to take over Elgin Capital LLP and Ares Management LLC, a Los Angeles-based 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, according to a news release.
There have been more than $7 billion of CLOs backed by widely syndicated loans issued in the U.S. this year, according to Bloomberg data. There was only one fund-managed CLO in Europe this year for 858 million euros, the data show.
Spreads on AAA slices of CLO debt in the U.S. as of 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.
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