Carlyle, KKR and Oaktree eye US leveraged loans at bargain prices
Money managers are considering buying cheap loans to package them into collateralized loan obligations.
Money managers including Carlyle Group Inc., KKR & Co. and Oaktree Capital Management are looking to purchase US leveraged loans that are selling at lower prices, according to Mint.
The firms are reportedly considering buying these loans to package them into bonds called collateralized loan obligations, or CLOs.
Strategists at JPMorgan Chase & Co. noted that more than 90% of these loans were being traded below their face value earlier this week, an amount higher than seen in nearly 18 months. This figure later moved closer to 85%.
The $1.5 trillion leveraged loan market faces concerns that inflation and high borrowing costs could cause defaults among weak companies. Ian Gilbertson, co-head of US CLOs at Invesco, said the recent selloff has expanded from lower-rated loans to higher-quality names.
CLOs are the largest investors in the debt market, owning approximately two-thirds of it. Barclays strategists reported that about 286 warehouse lines, which are short-term lines of credit used to buy loans, are currently open.
While new CLO sales are down, Deutsche Bank AG analysts reported that CLO equity distributions are averaging 2.8% this quarter. This represents a potential first quarterly increase since 2024, though levels remain low by historical standards.
