Manager of the Year was perhaps the toughest category at this year’s middle market CLO awards to judge, with a number of likely candidates. However, with a combination of consistent investment performance in a challenging market and strong issuance activity, Golub Capital is our worthy winner.
In terms of investment performance, the manager’s is remarkable in its unremarkability in such a volatile environment. “Things have been quite stable for us over the year. Obviously, that’s changing to an extent now with rising inflation, interest expense and other factors that are impacting the leveraged loan market more broadly. But for us, performance has been quite good,” says Alan George, Managing Director, Head of Structured Products at Golub Capital.
He continues: “Our portfolio companies continue to grow top line revenue and are operating well through this current period of volatility. Defaults have been very, very low. This is consistent with what we've seen from Golub Capital over the last 15 years.”
At the same time, Golub Capital issued and managed six new MM CLOs in the awards period from 1 October 2021 to 30 September 2022, one more than its nearest competitor. They comprised four new issues and two resets.
Among those deals is Golub Capital Partners 18(M)-R2, SCI’s Transaction of the Year. But, overall, George views all six deals as part of a greater whole. “Each deal is a little nuanced in terms of the investor base and the documents that those investors require, so we balance our CLO liabilities across investor constructs,” he says. “They were all very good transactions in the typical middle market structures that we've issued over the years.”
That all-encompassing approach is in essence how Golub Capital seeks to differentiate itself. George explains: “One of the ways we differentiate ourselves is by having the type of fund construct where all the equity is owned by our private funds and so all the debt, assets and equity are consolidated onto one balance sheet. It allows us to functionally manage our portfolio across our various leverage facilities and enables us to optimise our portfolio within the constraints of our financings.”
As a result, Golub Capital can take a proactive approach across all its facilities to align the interests of the debt holders with the equity holders. “We're able to better manage risk because we are not selling third-party equity and filling up one CLO with some outsize risk relative to our other products,” says George.
He believes this approach is key for investors. “When you're buying CLO bonds, you have to understand fundamentally how the manager is prepared to manage that securitisation and what kind of controls and levers they can pull to operate through times of volatility.”
What George believes is unique to Golub Capital is the whole package. “What sets us apart from our peers is our ability to manage liabilities the right way, the fact that we've done this successfully for a long time and that we have the right expertise in place in terms of workout specialists, underwriters and valuation team to help effectively manage the pool,” he concludes.
For the full list of winners in this year’s SCI Middle Market CLO Awards click here.-