Strong Europe CLO volume forecast for rest of year; euro CLO AAA spreads mostly unchanged

By Cristal Cody

Tupelo, Miss., Aug. 27 – Strong European CLO issuance continues to be expected by market participants for the remainder of the year.

Blackstone/GSO Loan Financing Ltd. said in a news release on Thursday that the forecast is €18 billion to €20 billion of CLO volume in 2015, with €7.5 billion issued during the first half of the year.

“We expect loan market technicals to remain strong in the short-term and ramping CLOs should support secondary levels,” Blackstone/GSO said. “We believe that ECB policy will remain ultra-accommodative, continuing to support credit and providing a liquidity injection that supports risk premiums.”

BofA Merrill Lynch analysts forecast €18 billion of broadly syndicated CLO issuance for 2015.

About €19 billion of global euro-denominated CLOs, including Italian and Portuguese issuance, has priced year to date, according to data compiled by Prospect News.

Euro-denominated CLO AAA-rated spreads are mostly unchanged in the Euribor plus 135 basis points area, according to a market source.

Blackstone/GSO Debt Funds Management Europe Ltd. has priced two euro-denominated CLOs year to date.

“Since January the continued successful ramp-up of the direct loan portfolio has enabled the originator to establish two new European CLOs and invest €47.025 million in European CLO income notes,” Blackstone/GSO said in the release to discuss the company's six-month financial results for the period ended June 30. “The originator also established its first U.S. CLO, investing $28 million in the income notes of this CLO.”

Blackstone/GSO Loan Financing is a Jersey-based closed-end investment fund and affiliate of the Blackstone Group LP that invests in floating-rate senior secured loans directly and indirectly through CLO income notes.

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