Blackstone Closed on 3 CLOs in Q2 So Far (BX)

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The Blackstone Group (NYSE: BX) has announced the closing of three newly created collateralized loan obligation funds totaling $1.3 billion. Yep, CLOs. These were all created over the past month.

In March, Blackstone merged its existing CLO group with the team from its newly acquired GSO Capital Partners. This 35 person CLO team has offices in New York and London. The combined CLO group now manages $14 billion across 26 funds in the US and Europe.  The new CLOs closed by the group were as follows:

  • Columbus Park ($400 million) on April 3rd,
  • Riverside Park ($500 million) on April 15th,
  • and Tribeca Park ($400 million) on May 1st.

In this release Blackstone noted that Standard and Poors’ showed the first three months of
2007 with 48 CLO’s created with total volume of $24.8 billion.  This compares to only 11 new CLOs with aggregate volume of $6.0 billion in the first three months of 2008.  While that is a drop of 76%, it’s still larger than many would have guessed considering the credit malaise and street-wide shut downs that have been seen in the sector.

Blackstone said that while ‘aspects of the credit markets have experienced a degree of dislocation,’ it believes the limiting factor in creating new CLOs is most directly related to the lack of supply for the CLOs’ most senior capital tranche, AAA-rated liabilities.  That is interesting considering the fact that the lower-end became impossible to place last year.  Maybe the number of people with stellar credit has fallen off the roof.

These AAA liabilities represent approximately 70% to 75% of a generic CLO’s capital structure and recently have been available to only the most highly regarded asset managers.

Maybe we’ve seen the bottom and the worst in this sector after all.  The fact that CLO’s are even publicly being priced may be good enough reason to celebrate.

Jon C. Ogg
May 6, 2008