Octus on Credit: When will the turkeys come home to roost?

Adelene Lee, Senior VP, Managing Editor

US CLO managers have a lot to be thankful for, with 2024 being a year of many firsts. 

The market set a new annual record over Thanksgiving week with managers raising $192.5 billion year to date, surpassing 2021’s record $191 billion, data by Octus shows. But that wasn’t the only reason to celebrate. Liability spreads, or the managers’ cost of borrowing, dropped to all time annual lows. In Goldentree’s latest deal, its senior triple-A notes at SOFR+ 127 bps, the tightest level in 2024 and in BlackRock’s latest offering, Magnetite CLO XLI, its double-Bs priced at 490 bps, the first five-year reinvestment CLO this year to break through the 500 bps barrier. 

Although the pace of CLO issuance reached new records in 2024, there was a slowdown in the number of new entrants to the manager base compared with 2023, at least for deals backed by broadly syndicated loans. This year saw Permira Credit, Polus Capital Management and Obra Capital enter the market as managers in the United States, while in Europe Credit Industriel et Commercial and Fortress Investment Group both debuted in November. In contrast to more established managers, new managers are showing more restraint and are investing in assets with less credit risk, according to Octus’ Portfolio Analytics tool.

But the party won’t end here. With the Fed poised to continue its rate cutting, the scene should be comfortably set for an uptick in M&A activity and primary debt issuances, giving CLO managers plenty to feast on in 2025. 

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