AIG Global Investment Group, the Los Angeles-based manager, has priced its first European collateralized loan obligation, Euro-Galaxy CLO 2006-1. The firm opened a London office at the beginning of the year. "It was really a logical extension of our business platform of managing leveraged loans in the U.S.," said Steven Oh, managing director and co-head of leveraged loans along with John Lapham. "The European business is a growing part of the leveraged loan market and we saw the opportunity to leverage not only our expertise here, but also the investment expertise of AIG in Europe."
Oh said one of the other reasons AIG entered the European market was because of an increasing convergence of the global credit markets and seeing many more cross-border transactions. "You really need personnel on both continents to be able to analyze those transactions," he said.
The firm opened the office at the beginning of the year and hired Simon Hillard, a managing director with 26 years experience in the loan market, in April from CIBC World Markets in London. There are currently five employees in London, including Hillard. The firm moved Adeel Shafiqullah and Julie Bothamley over to London from the L.A. office. Bothamley, managing director and co-portfolio manager, will be working over there for a temporary basis.The firm also hired Giuseppe Schermi from another firm in Milan. The fifth employee serves in a more junior role.
"We have moved a couple of people to the London office and the reason we did that was to make sure we had common credit culture and leverage the U.S.-based staff and integrate them into the London business," Oh explained. "We don't view this as a separate business, but as one combined group."
The E383 million Euro-Galaxy CLO consists primarily of European assets, but also has a carve out for non-European assets. It also has a 15% limitation on second liens and mezzanine credits. There are two tranches of Triple-As, the funded portion is priced at EURIBOR plus 22 basis points and the delayed draw tranche is priced at EURIBOR plus 24 basis points. Morgan Stanley is the manager. Oh said the firm chose Morgan Stanley because of its strong reputation as a CLO structurer and underwriter. AIG has worked with Morgan Stanley in the U.S. in the past.
Oh anticipates the firm doing one European CLO a year, depending on market conditions. He does not anticipate AIG doing any other type of structure outside of a CLO in Europe.
