Sankaty taps Europe with €364 million Rye Harbour deal; CLO exposure to energy sector light

By Cristal Cody

Tupelo, Miss., Dec. 16 – European CLO issuance rose to more than €21 billion year to date following an offering from Sankaty Advisors LLC, according to a market source and data compiled by Prospect News.

Sankaty Advisors priced €364,025,000 of notes in the Rye Harbour CLO Ltd. transaction and placed the AAA tranche at Euribor plus 130 basis points, a source said.

Looking ahead, CLO issuance is expected to slow with most market participants out in the upcoming week, a source said.

Market volatility in the high-yield oil and energy sector has caused some concerns among CLO managers and investors, sources report.

“Energy-related angst amongst CLO investors is certainly warranted particularly amongst subordinated debt and equity investors, but at the moment we don’t think the exposure is broad enough to cause serious alarm for senior and most mezzanine tranches,” according to a J.P. Morgan Securities LLC report.

“Only 8% [or $950 million] of CLO exposures are second lien, and a little over half of the top 15 first lien energy loans in CLOs currently trade above $90,” JPMorgan said. “Additionally, only 0.2% of European CLO collateral is in the oil and gas sector.”

Standard & Poor’s said in a report that U.S. CLO exposure to the oil and gas market is “relatively muted.”

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