Q1 2006 record Euro CLO issuance

Standard & Poor’s (S&P) reports that 11 transactions priced or closed in the European Collateralised Loan Obligation (CLO) market during Q1 this year, compared to just five such deals in Q1 2005. Reasons for the growth in this asset class is explained, according to S&P, by “the substantial LBO pipeline and the increasing allocation of this market toward CLO managers, which amounted to 32.6% for the first quarter of 2006.” Other factors cited include relatively robust, albeit tightening, asset spreads in Europe, while CLO liability spreads have tightened substantially since the historically wide levels of mid 2003 and the fact that asset spreads in the US market have tightened considerably more compared to Europe.

S&P says: “This increased share of the primary market for CDO managers forms part of a wider growing institutionalisation of the market. Still, access to paper for new managers is a growing concern and challenge, especially given the modest level of diversity (issuer and industry) in the market.” The full S&P report is titled European CDOs of Leveraged Loans Q1 2006 Review.