Apollo brings market's third euro CLO; risk-retention compliance could slow deal pace

By Cristal Cody

Tupelo, Miss., April 12 - Apollo Global Management, LLC priced €325 million of floating-rate notes due 2025 in the third collateralized loan obligation structure sold this year.

"There's a real willingness for debt investors to invest in European CLOs," a market source said on Friday. "There's pent-up demand with no CLO paper to invest in for many years. The levels from which the debt is clearing is really not that far off from where it is in the U.S."

The European CLO market reopened in February with Cairn Capital Ltd.'s sale of €300.5 million of notes due April 20, 2025, followed by Prameria Investment Management Ltd.'s €300 million offering of notes due June 25, 2025.

Cairn CLO III BV sold the AAA-rated €181.5 million tranche of senior secured floating-rate notes (Aaa/AAA/) at six-month Euribor plus 140 basis points in February, while Pramerica's Dryden XXVII Euro CLO 2013 BV priced its top-rated portion also at a spread of 140 bps plus Euribor.

Other managers including Carlyle, KKR Asset Management, New Amsterdam Capital and 3i are reported to be looking at new vehicles, but the 5% risk retention requirement likely will keep the market from expanding quickly, according to sources.

"There's the potential for the European market to grow, but any short-term growth will be somewhat paced by the willingness to provide risk retention equity," one source said.

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