Headline: Blackstone Forecasts Surge in M&A Activity Fueling CLO Sales in 2025
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Blackstone Inc. anticipates a significant increase in mergers and acquisitions (M&A), boosting the demand for collateralized loan obligations (CLOs). In 2024, CLO sales reached a record $201 billion, driven by investor demand for securities benefiting from higher interest rates.
Michael Zawadzki, Chief Investment Officer at Blackstone's credit and insurance unit, predicts robust CLO issuance in 2025, citing favorable conditions such as tightening liability, low default risk, and expected M&A activity.
Other analysts share Blackstone's optimism. JPMorgan Chase & Co. projects a resurgence in M&A and leveraged buyouts, while Morgan Stanley anticipates increased M&A activity and substantial growth in new loan issuance.
Overall M&A volume surged 16% in 2024 to $3.1 trillion, indicating a positive trend that should further drive CLO sales. Tightening risk premiums also enhance the attractiveness of CLOs. In January, triple AAA-rated broadly syndicated loan CLO spreads narrowed to 122 basis points, the lowest in over a decade.
Elmwood Asset Management recently issued a $515 million CLO with a 115 basis point spread, marking the tightest deal since the Great Recession. The expected growth in 2025 extends the strong performance of 2024, with CLO total returns ranging from 8% to 21%.
Michael Sobol, Head of CLO Investing at Blackstone, highlights the maturing CLO market and deepening investor base. The positive performance is expected to continue in 2025, fueling further CLO issuance.
Citations:
* Data compiled by Bloomberg
* Statements from Michael Zawadzki, Michael Sobol
* Analyst reports from JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc., Deutsche Bank, Nomura