Barclays Capital is in the process of planning and structuring its first U.S.-based collateralized loan obligation, a cash flow deal with an asset base of at least $400 million in leveraged loans. Elliot Asarnow, global head of research and credit portfolio, said the bank hired Hans Christensen to start up a U.S. leveraged loan investment management business at the end of last month to start structuring the vehicle. Christensen was formerly a portfolio manager at Citigroup. "The first fund will come as an arbitrage cash flow CLO. If you're a manager focused on the U.S. leveraged loan market, that's been the vehicle of choice the last few years," he said.
Asarnow said the fund would look to do even more than the benchmark $400 million deal, but added that, "no one's doing the billion dollar deals anymore." He said the fund would look to do at least two transactions in the next year, but noted he couldn't make predictions as market conditions change.
Asarnow said he believes a trend is developing with loan investment groups affliating with large institutions rather than setting up boutiques. "Investors take comfort with institutions that co-invest and provide an additional layer of governance over the process. A parent can put in additional capital at the inception of each transaction," he added.