GSO Capital Partners LP, the $66 billion credit unit of Blackstone Group LP, is seeking more than 200 million euros ($272 million) for a publicly traded fund that will buy European loans and help the firm create new investment pools.
GSO, acquired by New York-based Blackstone in 2008, expects to produce annualized returns of about 15 percent with the fund, according to a prospectus today. It will primarily invest in European senior secured loans and the riskiest slices of collateralized loan obligations issued by GSO. Shares are expected to start trading on July 18.
Led by Bennett Goodman, GSO has expanded from $10 billion when Blackstone bought the firm, in part by issuing CLOs, which pool leveraged loans and then slice them into securities of varying risk. Investors seeking higher yields amid record low interest rates have snapped up about 7 billion euros of new CLOs in Europe this year and issuance is at a record pace in the U.S.
Regulators in the U.S. are expressing concern about lax lending standards. The Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. updated guidance last year on leveraged lending, noting “tremendous growth” in the volume of credits, “the participation of unregulated investors” and the use of “aggressive” capital structures.
GSO is the largest manager of CLOs in Europe with 7.5 billion euros under management, according to the prospectus.