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JPMorgan Forecasts European CLO Sales of as Much as $5 Billion

Collateralized loan obligations will raise $3 billion to $5 billion in Europe this year, according to a forecast from JPMorgan Chase & Co.

CLO formation in the region will increase global issuance to as much as $75 billion, JPMorgan analysts led by London-based Rishad Ahluwalia wrote in an April 5 report.

The spread for the AAA rated portion of European CLOs may be at about 120 basis points by the end of 2013, according to the research report, which cited the results of a survey from 81 clients. For U.S. deals, the respondents see spreads at 90 basis points to 100 basis points.

Apollo Global Management LLC and Pramerica Investment Management Ltd. are marketing European CLOs which may price the top-ranked notes at about 135 basis points more than the euro interbank offered rate, people with knowledge of the matter said.

London-based Cairn Capital Ltd. sold its 300.5 million-euro deal in February with the AAA piece at 140 basis points more than Euribor, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.

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