BlackRock Joins PNC in Seeing Value in CLOs as Issuance Soars
Jan. 28 (Bloomberg) -- BlackRock Inc. and PNC Financial Services Group Inc. (PNC) view collateralized loan obligations as offering some of the best value in the credit markets after securitized debt rallied last year.
“You can be pretty bullish across the entire capital structure,” Leland Hart, a managing director at BlackRock, the world’s largest asset manager, said today during a panel discussion at the American Securitization Forum’s annual conference in Las Vegas.
Prices of CLOs, which are created by slicing speculative- grade company loans into a series of new securities with varying risks, have soared along with sales as depressed yields on Treasuries and calming markets push investors to seek potentially higher returns. Values of residential and commercial mortgage securities have also gained.
CLOs still “are very cheap,” while some other securitized debt is more dangerous, Gagan Singh, chief investment officer at PNC’s bank unit, said. “This will be the year of sector selection. Last year you wanted to be long risk.”
Bank of America Corp. forecasts as much as $75 billion of CLO issuance this year. The first three weeks of the year were more active than the first two months of 2012, when $3.1 billion of funds were arranged, according to Bloomberg data. There were $52.6 billion of deals backed by widely syndicated loans issued in 2012.
“The limiting factor on CLO formation will actually be the supply of loans,” Hart said.
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