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Bain Capital's Hedge Fund Prices Second CLO As Credit Bubble Simmers

Tyler Durden's picture




 

We will have much more to say on the grandiose return of CLOs in the next few days (those who were not in high school during the peak of the credit crisis, so most of today's "traders", recall these peak credit bubble contraptions quite well) but for now we just wanted to bring to our readers' attention that yet another $625 million CLO has just priced, this time from Sankaty, courtesy of Morgan Stanley. Anyone needing confirmation that the credit bubble is back with a bang, need look no further than the table below.

Per Leveraged Loan:

We look forward with amusement once the confused peanut gallery, aka CTRL-C/V majoring "financial media" (where even the somewhat more qualified are about to be "synergized" following news that the FT is pushing hard with a sale), realizes that Sankaty is Bain Capital's $20 billion credit affiliate hedge fund, especially if the election goes for Romney, and goes all aflutter googling what a CLO is and what it means for the flood surge level of liquidity in the market (but, but, Bernanke is printing it all for the children... and housing).

 

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Tue, 11/06/2012 - 16:09 | 2952927 Silver Bug
Silver Bug's picture

Let the Ponzi Schemes continue!

 

http://schiffblog.blogspot.ca/

Tue, 11/06/2012 - 21:40 | 2953815 lineskis
lineskis's picture

We look forward with amusement once the confused peanut gallery, aka CTRL-C/V majoring "financial media" (where even the somewhat more qualified are about to be "synergized" following news that the FT is pushing hard with a sale), realizes thatSankaty is Bain Capital's $20 billion credit affiliate hedge fund, especially if the election goes for Romney, and goes all aflutter googling what a CLO is and what it means for the flood surge level of liquidity in the market (but, but, Bernanke is printing it all for the children... and housing).

Tyler, I'm in admiration of your prose... '.'

Tue, 11/06/2012 - 16:11 | 2952945 Flakmeister
Flakmeister's picture

Libor + 100?

Wake me when we to LIBOR + 17....

Tue, 11/06/2012 - 16:29 | 2953004 Tyler Durden
Tyler Durden's picture

Libor is 0.312%

Last time you had LIBOR + 17 bps, Libor was at 1.5%

Tue, 11/06/2012 - 16:46 | 2953053 Flakmeister
Flakmeister's picture

Yeah...

then agian, that was the last time I cared where Libor was....

Tue, 11/06/2012 - 16:57 | 2953099 disabledvet
disabledvet's picture

Nice comeback! A comparison with "the Salad Days" please!

Tue, 11/06/2012 - 18:25 | 2953276 TruthInSunshine
TruthInSunshine's picture

What will be, will be, in The Bernank'd Markets, but it's feeling really Blackstone Group goes public-ish, circa 2007, to me.

As just another example of how insanely bubble-lishish things are, check out the yield on the lastest 5 year bond Caterpillar just floated (hint: It has a lower yield than many FDIC insured, shorter maturation, CERTIFICATES OF DEPOSIT, bitchez).

Oh well. BTFD.... or not.

Tue, 11/06/2012 - 18:52 | 2953407 Anonymouse
Anonymouse's picture

I remember those days all too well.  Back then, the weighted average price of CLO debt was about L+52 as I recall.

This one is L+198 (or L+210 considering the DM).  Still a long way to go to hit 2007 levels.

But Sankaty is one of the best CLO managers out there, so good for them.

Does bring to mind an article I saw the other day about PE firms dividending themselves out of any equity risk.  I think (absent a market / credit rout) that will be the bellwether.  If that picks up at the same time CLO volume picks up, it indicates a lack of market discipline.

Tue, 11/06/2012 - 16:18 | 2952970 LawsofPhysics
LawsofPhysics's picture

Ahhhh, so many paper promises and so relatively few physical assets.

Tue, 11/06/2012 - 16:42 | 2953044 AldousHuxley
AldousHuxley's picture

plenty of physical assets....they are just artificially controlled for max profit to owners of systems.

 

capitalists just want you to believe that "stuff" are the most precious resource to keep you working to increase productivity.

 

but your time on earth and your social rank is ALWAYS limited.

 

 

Tue, 11/06/2012 - 16:57 | 2953101 LawsofPhysics
LawsofPhysics's picture

Exactly.  Careful, I never defined what I consider valuble.  I'd agrue that anything is possible as this has always been about power and control.  Moreover, things always look very different depending on what role you play in any given situation.  If you are at the top of any ponzi and there are many like-minded individuals under you, things can be pretty great.  But yes, nothing last forever, which is precisely what the money printer/changers are counting on.

Tue, 11/06/2012 - 17:11 | 2953153 sessinpo
sessinpo's picture

AldousHuxley

plenty of physical assets....they are just artificially controlled for max profit to owners of systems.

capitalists just want you to believe that "stuff" are the most precious resource to keep you working to increase productivity.

but your time on earth and your social rank is ALWAYS limited.

 

Artificially controlled - That is quite often a price a seller demands but can't seem to get in ANY market, even one deemed free.

Everyone's times is limited, the difference is what YOU do with the resources during that time. In other words, one can be a liberal and utilize resources in a less productive way or one can allow for free markets to dictate to YOU the best way to utilize those same resources in a more beneficial way for your gain and for the gain of society as a whole.

 

To put it another way, in layman's terms. Give two people $10k. One might buy $10k of lottery tickets and get lucky or waste it as discretionary spending. Or one might try to use that money for productive means to increase that orginal $10k by EARNING it.

Both might fail, but I would still bet on the second person that is putting that capital towards productive uses, adding their own work to EARN higher wealth. And both may have the exact same time limit.

Socialism vs capitalism exposed.

 

 

Tue, 11/06/2012 - 17:39 | 2953247 LawsofPhysics
LawsofPhysics's picture

"Or one might try to use that money for productive means to increase that orginal $10k by EARNING it."

---------------------------------------------------------

Two questions for you; 

1) are they producing something of real value or just pushing fucking paper?

2)  If the risk they took should fail, don't rob my wealth to bail them out.

I suggest you look the fuck around, isn't fascism great?

Tue, 11/06/2012 - 17:09 | 2953142 drivenZ
drivenZ's picture

no more papery than anything else. These aren't CDS. Sure it's a pool but the pool is built on loans to real companies usually secured or partially secured by real assets and/or atleast cash flows.  

 

now if you buy the equity tranche, well, yea you're probably outside the asset coverage. But that's the nature of tranching. 

Wed, 11/07/2012 - 08:18 | 2955246 schadenfreude
schadenfreude's picture

Sure it's a pool but the pool is built on loans debt to real companies people usually secured or partially secured by real assets houses and/or atleast cash flows.income.

Sure CLO's are much better then CDO's

P.S. Strikethrough doesn't work

Wed, 11/07/2012 - 09:41 | 2955551 drivenZ
drivenZ's picture

CLO's are a type of CDO. If you're talking about pools of mortgages vs pools of coporate loans, then yes I think CLO's are "better". The collateral isn't as homogenous and you usually have covenants in loans whereas the avg person can spend their income on whatever they want, in a properly structured loan there'd be restrictive covenants. Not to mention there is 0 certainty with regards to payback period for mortgages. Loans have a defined maturity and possibly prepayment penalties. 

Tue, 11/06/2012 - 16:21 | 2952974 cougar_w
cougar_w's picture

They need to let this Tyler out of his/her cage more often.

Don't synergize me, bro!

Tue, 11/06/2012 - 16:37 | 2953009 Dr. Engali
Dr. Engali's picture

My favorite Tyler....75 or so words in that first sentence, 89 in the last.

Tue, 11/06/2012 - 16:29 | 2952984 optimator
optimator's picture

Google Bain Capital and Orit Gadiesh.  Then you'll know who, what, when and where about Romney, and why!

http://fromthetrenchesworldreport.com/mitt-romneys-ties-to-israeli-military-intelligence/10646/

Tue, 11/06/2012 - 17:14 | 2953173 walküre
walküre's picture

It will be USrael against the rest of the world. Get your gold to safety before their God throws a fit of curses and plagues.

Tue, 11/06/2012 - 17:31 | 2953228 emersonreturn
emersonreturn's picture

walkure, +1...USrael.

Tue, 11/06/2012 - 17:09 | 2953130 mr. mirbach
mr. mirbach's picture

CLO = Collateralized Loan Obligation, just like an MBS only as good as the ability of the creditor to pay...

Another sign of the apocolypse.

 

Tue, 11/06/2012 - 17:15 | 2953174 Urban Redneck
Urban Redneck's picture

depends on the colateral

Tue, 11/06/2012 - 18:53 | 2953413 Anonymouse
Anonymouse's picture

CLOs are managed portfolios, unlike the MBS deals of yore.  So long as the manager picks the collateral, these can work.  I wouldn't buy one today, but that's because of credit risk, not because of the structure.

Tue, 11/06/2012 - 19:10 | 2953459 R_J
R_J's picture

hmmm CLO /2.0/ = Corzined Liquidity Obfuscation

Tue, 11/06/2012 - 17:09 | 2953148 walküre
walküre's picture

Synthetic wealth creation. End of evolutionary advantage. Adaptation is impossible.

Tue, 11/06/2012 - 17:32 | 2953236 I am a Man I am...
I am a Man I am Forty's picture

You can kiss the fucking D, E, and Equity classes goodbye.  Only an idiot would be in one of those lower tranches for an extra 1 or 2% when they can lose everything.  

Tue, 11/06/2012 - 17:40 | 2953251 LawsofPhysics
LawsofPhysics's picture

Isn't that where the vast majority of all the 401ks, 403bs etc are?  Oh wait...

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