CLO Sales Make 2013 Third Busiest Year on Record, JPMorgan SaysKristen Haunss
Global issuance of collateralized loan obligations rose to $67.5 billion in 2013, the third biggest year on record.
There were $61.1 billion of CLOs raised in the U.S. and 4.8 billion euros ($6.5 billion) issued in Europe, according to JPMorgan Chase & Co. Sales peaked in 2006 when $135.9 billion of deals were raised, followed by $130.9 billion in 2007, according to JPMorgan.
“Resurgent loan supply, greater investor demand for CLO liabilities, and while more challenging of late, reasonably attractive equity returns to drive the arbitrage,” has led to an increase in CLO volume in 2013, Rishad Ahluwalia, the head of global CLO research at JPMorgan in London, said in an e-mailed statement.
Wells Fargo & Co. forecasts $70 billion to $80 billion of CLOs will be raised in the U.S. this year, according to a Sept. 26 report. CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and returns.
Bank of America Corp. raised one of the most recent funds in the U.S., an $832.5 million CLO for Symphony Asset Management LLC that pays a coupon of 130 basis points more than the London interbank offered rate for a $500 million AAA piece, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
JPMorgan revised its U.S. year-end CLO AAA forecast Sept. 6 to between 125 basis points and 130 basis points more than the benchmark from 100 basis points. Libor is the rate banks say they can borrow in dollars from each other.
CLOs were the largest buyers of leveraged loans in the second quarter, with a 53 percent market share, according to a report from the Loan Syndications and Trading Association, citing Standard & Poor’s Capital IQ Leveraged Commentary & Data.