(Bloomberg) -- Asset manager Golub Capital issued the second-largest reset of a collateralized loan obligation on record late last week, created through an amalgamation of multiple CLOs.
Golub fused four different CLOs together, a type of transaction that’s been performed at least once before. Its combination formed a massive $1.7 billion reset, just behind a $2 billion record set by Antares in 2021, according to data from JPMorgan Chase & Co.
Apollo Credit Management also refinanced four CLOs into one deal in 2020, allowing the manager to skip buying new assets from the primary and secondary market.
CLOs are securities that bring in capital through bonds sold to credit investors who want exposure to leveraged loans or private credit loans. CLO resets allow investors to refinance and extend the life of the securities. More than $176 billion of CLO resets have been sold this year, compared to $11 billion last year at this time.
They’ve been popular in 2024 as the cost of funding has declined and as managers seek more time to find loans at lower valuations. Nearly $30 billion of CLO resets priced in October, just months after the sector cracked $20 billion in a month for the first time.
S&P Global Ratings, which rated the top tranche of Golub’s CLO as top notch at AAA, said its biggest concentration is in software. That sector is well ahead of health care, commercial services and professional services, according to an Oct. 18 report from the ratings firm.
A Golub Capital spokesperson declined to comment, as did a representative of Deutsche Bank, which arranged the deal.
Analysts are projecting an active CLO market for the rest of the year, even after October notched the busiest month ever for issuance. Citi expects between $260 billion and $280 billion for refinancing and reset totals in 2024, indicating that elevated sales will continue.
(In Nov. 5 story, corrects size of transaction throughout to exclude equity, and corrects throughout to reflect that Antares transaction was bigger)
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