Blackstone Group LP, the world’s biggest private-equity firm, priced the largest collateralized loan obligation in Europe this year after it increased the deal by almost 50 percent to meet investor demand.
GSO Capital Partners LP, the firm’s credit investment unit, boosted the Richmond Park CLO Ltd. to 615.7 million euros ($840 million), according to two people with knowledge of the deal, who asked not to be identified because it’s private. CLOs pool high-yield loans and slice them into debt securities of varying risk and return.
Investors are pursuing higher-yielding investments after almost five years of suppressed central bank interest rates. Credit managers raised 7.5 billion euros of CLOs in Europe this year, the most since 2008, according to Fitch Ratings. Issuance in the region will grow to as much as 15 billion euros next year, JPMorgan Chase & Co. said in a Nov. 27 report.
“The driver for issuance this year is that everybody is hunting for yield,” said Tapio Bartsch, a managing director at CIS Asset Management (Deutschland) GmbH, which invests in CLOs. “If institutional investors increase participation in leveraged loans as banks continue to shrink balance sheets, there’s decent chance for European issuance to grow further.”
Andrew Dowler, a spokesman for Blackstone in London, declined to comment on the deal.
The Richmond Park CLO includes 351 million euros of top-rated notes paying 140 basis points, or 1.4 percentage points, more than the euro interbank offered rate, the people said.
The extra yield investors demand for top-rated CLOs more than benchmark rates declined 50 basis points this year to 120 basis points, according to data compiled by JPMorgan. Spreads for BB portions tumbled 750 basis points to 650 basis points, the data show.
The sale is GSO Capital’s third CLO in Europe this year, following its 413.2 million-euro Herbert Park BV CLO priced in August, according to data compiled by Bloomberg.