A record amount of funds that bundle leveraged loans were issued last month as money managers rush to issue the securities before rules aimed at limiting risk-taking in the market take effect.
The credit unit of Blackstone Group LP, Silvermine Capital Management and Prudential Investment Management were among firms that sold $15.2 billion of collateralized loan obligations in March, surpassing the previous high of $13.8 billion in June 2014, according to data compiled by Bloomberg and JPMorgan Chase & Co. Only 10 out of the top 30 money managers may be able to comply with new regulations requiring them to hold a 5 percent stake in funds they manage, which take effect in December 2016, according to consulting firm Oliver Wyman.
Managers “want to get deals done early before risk retention kicks in,” Rishad Ahluwalia, the London-based head of global CLO research at JPMorgan, said in a telephone interview.
The risk-retention rule, released in October, is part of of the 2010 Dodd-Frank Act enacted in response to the credit crisis that was fueled in part by the securitized debt that bundle mortgages. CLOs bundle speculative-grade corporate loans that have been used to finance some of the biggest buyouts in history.
About $35 billion of CLOs have been issued this year after record sales of $123.6 billion in 2014, according to JPMorgan. The bank is predicting issuance of $70 billion to $80 billion in 2015.
The lower forecast is driven, in part, by risk-retention rules, which some managers may not be able to comply with, Ahluwalia said.
Blackstone’s GSO Capital Partners raised a $616.8 million deal with Goldman Sachs Group Inc. in March, while Silvermine sold a $512.4 million fund with Citigroup Inc., according to people with knowledge of the transactions, who asked not to be identified because the information isn’t public.
Prudential raised a $515.2 million CLO with Morgan Stanley last month, according to another person with knowledge of that deal.
Scott Helfman, a Citigroup spokesman, Theresa Miller, a Prudential spokeswoman, Mark Lake, a Morgan Stanley spokesman, Tiffany Galvin, a Goldman Sachs spokeswoman, and Richard Kurth, a Silvermine Capital co-founder, declined to comment. Peter Rose, a Blackstone spokesman, didn’t immediately return a telephone call seeking comment.