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CLOs Top $50B As Carlyle Floats Its Fourth

  • More than 100 priced in 2012
  • Third largest year for issuance
  • Wall of maturities looms by 2014

Carlyle Group, the Washington, D.C.-based mega-firm, reported in December that it had successfully floated Carlyle Global Market Strategies CLO 2012-4, its fourth such vehicle in 2012 and its largest of the year. Carlyle Group said the new CLO, a transaction arranged by Wells Fargo, is earmarked for investments in corporate leveraged loans and high-yield bonds.

Carlyle Group had previously launched new-issue CLOs of $510 million in March and June and a $615 million vehicle in September. The firm manages $17 million of structured credit and CLOs altogether through its Global Market Strategies unit, which has $30 billion of assets under management, comprising mezzanine and energy mezzanine loans; high yield and structured credit; distressed equity and debt; and four hedge fund strategies.

More than 100 CLOs have priced in the United States in 2012, more than 60 of them since the beginning of August, sister service Thomson Reuters Loan Pricing Corp. reported. Including CLOs in the pipeline, issuance stood at nearly $50 billion toward year-end, compared to $12.7 billion of new-issue CLOs in 2011.

At the start of the year, market watchers had said, optimistically, they anticipated $25 billion to $30 billion of new-money CLOs to come to market in 2012. Indeed, according to money manager Highland Capital Management LP, itself a large CLO issuer with $29 billion in total assets under management in the category, 2012 turned out to be the third largest CLO year on record, behind only the peak years of 2006 and 2007, when primary issuance topped out at $95.6 billion and $104.7 billion.

By the end of December, total CLO issuance was expected to reach $55 billion, Highland Capital estimated early in December, and 2013 issuance could reach $65 billion. But the leveraged loan market will need continued health in this instrument. According to Mark Okada, co-founder and chief investment officer at Highland Capital, 90 percent of existing CLOs will come to the end of their reinvestment periods by the end of 2014, 80 percent of them by the end of 2013.

About 42 percent of CLO holdings comprise leveraged loans, according to Thomson Reuters LPC. In addition to new deals, a sizable share of older vintage CLOs are also expected to refinance in 2013, LPC reported.