Palmer Square Prices Over $1.8 Billion in CLOs Setting the Market
Palmer Square Capital Management announced over $1.8 billion in CLO issuances across three benchmark transactions in the past week. The firm priced a $1.0 billion static CLO, the largest BSL CLO deal of 2024, with the AAA tranche at 108 basis points. Additionally, a €416 million European CLO reinvestment transaction set a new benchmark for European AAA pricing. Palmer Square's publicly traded BDC, Palmer Square Capital BDC (NYSE: PSBD), also priced a $400.5 million debut CLO. Overall, Palmer Square has issued $4.2 billion in CLOs this year. CEO Christopher Long highlighted the firm's disciplined approach and industry-leading team.
- Palmer Square issued over $1.8 billion in CLOs across three transactions.
- The $1.0 billion static CLO had the lowest AAA pricing of the year at 108 basis points.
- A €416 million European CLO set a new benchmark for European AAA pricing.
- PSBD's $400.5 million debut CLO is the first BSL CLO in the publicly traded BDC market.
- Palmer Square has issued approximately $4.2 billion in CLOs year-to-date.
- Overall, Palmer Square has issued 74 CLOs.
- No significant negative business or financial aspects were evident in the press release.
Insights
Palmer Square's announcement of over
The pricing of the AAA tranche at 108 basis points—the lowest coupon this year—is particularly impressive and suggests that investors are seeking high-quality assets and are willing to accept lower yields in exchange for safety. This can be seen as a positive indicator of market sentiment towards CLOs, which could impact other firms in the sector as well. The fact that Citibank and Bank of America were the arranging partners also adds credibility and might influence other investors.
From a financial perspective, the debut CLO from Palmer Square’s publicly traded BDC, PSBD, is intriguing. This move not only diversifies PSBD's financing options but also enhances liquidity by tapping into the public market. The transaction sets a precedent and could encourage other BDCs to explore similar financing routes, potentially altering the landscape of term-based financing for BDCs.
Although this news is positive in many aspects, investors need to be cautious of the broader economic environment. The relatively low yield in these transactions could be a sign of tightening credit spreads, which could impact the profitability of future CLO issuances. Additionally, the performance of the underlying loans, especially in current economic conditions, remains a risk factor.
The issuance of these CLOs by Palmer Square marks a significant development in the credit market, signaling strong investor demand and confidence in structured finance products. It's important to note that CLOs are typically composed of pooled corporate loans, which are then sliced into tranches with varying levels of risk and return. Palmer Square's ability to price these tranches competitively indicates a positive market reception.
The success of the European CLO issuance is particularly noteworthy, as it sets a new benchmark for AAA pricing in the region. This indicates that European investors are also keen on high-quality structured products, despite the ongoing economic challenges. Such benchmarks are important as they often set the tone for subsequent issuances in the market.
For retail investors, it's essential to understand that while CLOs can offer attractive returns, they come with their own set of risks, primarily linked to the performance of the underlying loans. The pricing dynamics and demand for these instruments can also be influenced by macroeconomic factors such as interest rates and economic growth.
Moreover, the fact that Palmer Square has issued
The recent issuances by Palmer Square highlight the firm's proficiency in navigating the intricate credit markets. A close look at the transaction details reveals that the AAA tranche’s pricing at 108 basis points is remarkably competitive, suggesting that Palmer Square has successfully managed to secure favorable terms. This is particularly noteworthy in the context of static CLOs, which typically feature higher-quality assets and lower risk than more dynamic, reinvestment-focused CLOs.
It's also essential to consider the broader implications of these transactions. The debut CLO from PSBD marks an innovative step in the BDC market, offering term-based financing secured by broadly syndicated loans. This could pave the way for other BDCs to explore similar financing mechanisms, potentially diversifying their funding sources and enhancing their ability to withstand market fluctuations.
However, investors should be mindful of the inherent risks associated with CLOs, such as credit risk and the potential impact of economic downturns on the underlying loan assets. While the current low pricing is favorable, any deterioration in loan performance could adversely affect returns. Additionally, the competitive pricing might compress margins for future issuances, which is something to watch closely.
Overall, these issuances reinforce Palmer Square's position as a key player in the structured credit market, but it's important for investors to keep an eye on broader economic trends and the performance of underlying loans.
- Notable issuances include debut CLO from Palmer Square’s publicly traded BDC and a benchmark setting US Static and European CLO issuance
- Palmer Square has issued 7 CLOs in 2024 and the largest BSL CLO deal of the year
MISSION WOODS, Kan.--(BUSINESS WIRE)--
Palmer Square Capital Management (“Palmer Square”), a credit-focused asset management firm with over
Palmer Square priced Palmer Square Loan Funding 2024-3, a
The firm also recently priced Palmer Square European CLO 2024-1, a
Palmer Square’s publicly traded BDC, Palmer Square Capital BDC Inc. (NYSE: PSBD), through Palmer Square BDC CLO I, a wholly owned indirect subsidiary of PSBD, along with Bank of America as arranging partner, priced a
Year to date, Palmer Square has issued approximately
Palmer Square Chairman and CEO Christopher Long said, “Our history of precedent setting transactions, and especially our accomplishments on behalf of our investors in 2024 demonstrate the capabilities of our industry leading team, and the merits of our disciplined and differentiated approach to credit investing. We are all immensely proud of the value we have been able to provide for our investors, borrowers and stakeholders, and look forward to continuing to accelerate our strong growth trajectory.”
About Palmer Square Capital Management
Founded in 2009 by Christopher Long, with major offices in
View source version on businesswire.com: https://www.businesswire.com/news/home/20240514637959/en/
Prosek Partners
Josh Clarkson / Devin Shorey
646-818-9259 / 302-593-3197
jclarkson@prosek.com
Source: Palmer Square Capital Management
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