Leveraged loan market reassured by new European CLOs

That whoosh of air that’s been whipping around European financial centres is not an wintery gust of wind, but rather the sigh of relief from the leveraged finance market at the return of the CLO market.

  • 16 Apr 2013
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Only a few short months ago, leveraged finance bankers were adamant in their belief that raising new capital through new collateralised loan obligations (CLOs) in Europe was an impossible task. Liability costs, skin-in-the-game requirements of the EU’s Capital Requirements Directive and the restrictions of ramp-up periods were all insurmountable hurdles, they said.

They looked on the €250bn of leveraged loans set to mature in Europe by 2017 (as of the beginning of 2012), and at the existing European CLOs coming out of their reinvestment periods by the end of 2015, and they shuddered.

So the three European CLOs successfully priced so far this year —from Pramerica Investment Management, Cairn Capital and Apollo Global Managers — have proved to be a big relief for leveraged finance bankers.

With the recent CLO spread rally, the asset-liability arbitrage has started to work again, paving the way for new vehicles. The low yield environment across the rest of the markets means that there is plenty of investor interest in the new CLOs, and managers have discovered that as long as they can find a willing equity investor and a way to retain 5% of the deal, the new CLOs are back in business.

Although the new CLOs — at around €300m each — will not provide a huge amount of liquidity on their own, their very existence has given a much needed boost of confidence that the creation of new European vehicles is still possible. And with up to seven or eight other managers also thought to be considering new CLOs, bankers are hopeful that the market will see around one new product a month being priced for the rest of the year, providing up to €4bn of new capital in the market.

Combined with the growing levels of interest from managed funds in the leveraged finance market, bankers have, arguably for the first time since the beginning of the crisis in 2008, real cause for optimism about market liquidity.

This boost in liquidity comes just in time. Around 75% of funds in their reinvestment periods are expected to have run off by July, with some 80% disappearing by the end of the year. This drop-off in available capital will mean the market undergoes a sea change from the liquidity-rich financing environment seen over the first two quarters of the year. But at least now bankers know that the creation of new European CLO funds is not impossible. 

 

  • 16 Apr 2013

Global Syndicated Loan Volume

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 Jan 2017
1 JPMorgan 1,127.33 6 14.75%
2 SunTrust Robinson Humphrey Inc 1,060.67 5 13.88%
3 BMO Capital Markets 810.91 3 10.61%
4 Bank of America Merrill Lynch 777.33 4 10.17%
5 Capital One Financial Corp 713.04 5 9.33%

Bookrunners of Middle East and Africa Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Jan 2017
1 JPMorgan 5,902.99 10 8.20%
2 Standard Chartered Bank 4,827.24 24 6.71%
3 HSBC 4,808.94 15 6.68%
4 Mitsubishi UFJ Financial Group 4,528.41 10 6.29%
5 Bank of China 4,455.56 5 6.19%

Bookrunners of European Leveraged Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 Jan 2017
1 JPMorgan 19,492.11 46 8.85%
2 UniCredit 18,866.65 83 8.57%
3 HSBC 16,021.11 53 7.27%
4 BNP Paribas 13,314.73 89 6.05%
5 Credit Suisse 13,152.31 32 5.97%

Bookrunners of European Marketed Syndicated Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Jan 2017
1 Commerzbank Group 114.00 1 66.16%
2 CaixaBank 37.05 1 21.50%
3 UniCredit 10.62 1 6.17%
3 BNP Paribas 10.62 1 6.17%
Subtotal 172.30 3 100.00%

Syndicated Loan Revenue - EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Apr 2016
1 HSBC 35.45 69 6.71%
2 BNP Paribas 31.67 78 5.99%
3 ING 31.21 74 5.90%
4 Citi 22.60 36 4.27%
5 Deutsche Bank 21.89 32 4.14%