Blackstone's GSO Capital Partners credit business is buying the collateral management agreements for the nine collateralized debt obligation (CDOs) and collateralized loan obligation (CLO) funds currently managed by Callidus, a portfolio company of Allied Capital.
The acquisitions come as investors are looking for a revival in structured bond products that contributed to the global financial crisis. Some credit investors say a revival in those complex bond markets is needed before more liquidity and a strong recovery can take root.
CDOs backed by subprime and residential mortgage-backed securities may never come back, many analysts say, but some investors are looking for opportunities, particularly in CLOs backed by loans and higher quality bonds.
CLOs, opaque and complex investment vehicles, give investors access to leveraged loans in the form of a security. They were a popular tool for lenders to offload risk to the capital markets and a driver of the private-equity buy-out boom up until mid-2007.
The Callidus funds invest primarily in leveraged loans and high yield bonds and have total assets of about $3.2 billion.
Blackstone did not disclose the purchase price.
Blackstone's credit business, GSO Capital Partners LP, has over $24 billion of assets under management, and 24 CLOs in the US and Europe under management.
Business development companies make debt and equity investments in small- and middle-sized companies in return for equity stakes. They have been struggling to raise capital as the financial crisis reduced the value of their portfolio companies to which they make loans.
(Additional reporting by Walden Siew in New York; Editing by Derek Caney)